Or are you an Aussie expat looking to build or renovate your existing property in Australia? A construction loan might be just what you need. Unlike standard loans, construction loans allow you to pay for each stage of the build without needing all the funds upfront.
Construction loans, also known as building loans, are designed for individuals who are either building a new home or making significant structural changes, like adding a room or changing the roof, to an existing home. These loans offer flexibility by allowing you to draw down progress payments throughout the build or renovation.
A significant feature of construction loans is the ability to draw down your loan in instalments during the construction process. This means you’ll receive the loan amount in stages rather than as a lump sum. Typically, these stages include the deposit, foundation works, framework, lock-up, fixing (plumbing and electrical), and completion.
This staged payment approach means you only draw down the amount needed to pay your builder and contractors as they complete each stage. Consequently, you are only charged interest on the amount drawn down, not the total loan amount. The principal loan amount does not need to be repaid until after construction is complete, which can help manage cash flow throughout the project.
Construction loans are generally based on a fixed price contract, whether you’re building on new land or renovating an existing property. This contract means there’s limited room for change once the building or renovations are underway.
Typically, the loan is interest-only during the construction period and transitions to principal and interest payments once the project is completed. You may be able to negotiate to extend the interest-only term, so it’s worth discussing this with your lender if it appeals to you.
If changes are needed during the build, discuss these with your lender as they can affect forecast costs. It’s wise to account for potential changes when applying for the loan, as variations are common in construction and renovation projects.
To apply for a construction loan, you’ll need to provide your lender with council-approved building plans and a fixed price building contract from a registered builder. Usually, a deposit of 10%-20% of the total cost is required, and if your deposit is less than 20%, you might need to pay Lenders Mortgage Insurance.
Having a licensed builder increases your chances of loan approval, though you can apply as an owner-builder, which involves more paperwork and a longer process. A valuer may visit during construction to ensure the project is on track. Based on their report, the lender will continue payments or address any issues.
Be aware of key dates, such as when the build must be completed (Eg: within 24 months from the first drawdown). Keep your lender informed of any delays to discuss timeline adjustments.
Once construction or renovations are complete, you’ll need to provide final paperwork, such as the builder’s final invoice, building insurance policy, and certificate of occupancy.
Navigating the building and renovating process can be stressful, but we at Specialist Mortgage are here to help. Contact us today to learn how we can assist you with securing a construction loan, or any Australian home, and guide you through the process to make your dream home a reality.
We’ve got great news for Australian first home buyers looking to buy their first home down under! The First Home Super Saver (FHSS) scheme allows you to use some of your eligible voluntary Superannuation contributors towards buying your first home. You can withdraw up to $15,000 of your voluntary contributions from any one financial year, up to a total of $50,000 across multiple years, plus associated earnings.
Here’s what you need to know about the enhanced FHSS scheme and how it can benefit you.
The FHSS scheme allows first-home buyers to save for their deposit through their superannuation, reducing taxable income in the process. From 1 July 2022, the maximum amount you can release under this scheme increased from $30,000 to $50,000.
Under the FHSS scheme, you can make voluntary super contributions of up to $15,000 each financial year to save for your first home. These contributions can come from your salary or savings. The significant advantage here is that these contributions are taxed at only 15%, which is generally lower than your marginal tax rate, potentially allowing your savings to grow faster than in a regular bank account.
Additionally, a percentage of the earnings from your contributions is included when calculating how much you can withdraw through the FHSS. This figure is determined by the Australian Taxation Office (ATO), not your super fund.
If you opt to salary sacrifice $10,000 a year, you might need four to five years to reach the $50,000 cap, or you can access a lower amount sooner.
Tips from the experts:
– Maximise Contributions: Consider increasing your voluntary super contributions to reach your savings goal faster.
– Monitor Super Earnings: Keep track of your superannuation earnings to better estimate your potential FHSS release amount.
Eligibility for the FHSS Scheme
To participate in the FHSS scheme, you must be 18 or older and have never owned property in Australia. Eligibility is assessed individually, meaning each participant can use their own FHSS contributions toward the same property, even if buying with someone who already owns property.
Get ahead, quicker:
– Check Eligibility Early: Confirm your eligibility before starting the FHSS process to avoid any delays.
– Plan Joint Purchases: If buying with someone else, ensure that all eligible parties maximise their FHSS contributions.
Timing is crucial to ensure your funds are released in time for property settlement. The ATO process can take some time, so start the FHSS process early, ideally when you first apply for home loan pre-approval. Allocate at least six weeks for each step.
Steps for success:
Ensure you receive your FHSS determination before signing any property contract. The ATO website provides detailed conditions for releasing money under the FHSS scheme.
– Early Application: Apply for your FHSS determination as soon as you start considering property purchases.
– Track Timelines: Keep a timeline of key dates and deadlines to ensure a smooth release and settlement process.
You can only use the FHSS scheme once. From the date you make a valid release request, you have up to 12 months to sign a property contract and notify the ATO.
Make sure to:
– Plan Ahead: Have a clear timeline and plan for when you intend to purchase property.
– Stay Informed: Regularly check for updates on the FHSS scheme and ATO requirements.
The FHSS scheme can be a powerful tool to help you save for your first home deposit faster than a regular savings account, and it can help you pay less tax. We’re here to help you manage the timelines and rules involved, ensuring your funds are released in time for settlement.
By understanding and leveraging the FHSS scheme, you can make the most of your savings and achieve your dream of homeownership sooner. If you’re considering using the FHSS scheme or want to know how it can help you own your first home sooner, please give us a call.
the deposit you’re saving, your borrowing capacity, closing costs, your total budget, and anticipated monthly repayments. Amidst all these figures, it’s easy to overlook a critical number – your credit score.
If you’re diligently tracking all your other numbers but unsure about your credit score, you’re not alone. Approximately 80% of credit-active Australians are unaware of their credit score. Yet, this figure is crucial, especially if you’ve faced challenges in paying bills or meeting repayment deadlines.
Your credit score is a number between zero and either 1000 or 1200, depending on the credit reporting agency. Lenders use this figure to assess whether to grant you credit or a loan, determine the amount to lend, and set the interest rate. Essentially, lenders prefer offering better deals to individuals less likely to default on their loans. A higher score increases your chances of approval and securing favourable terms.
Your credit score is derived from the financial and personal information in your credit report. An algorithm processes various variables to generate your score, considering factors like:
– Your overall debt and how you manage it
– The number of loan applications you’ve made
– Your credit cards and current credit limits
– Accounts you’ve opened or closed
Credit reports also detail any financial hardship arrangements, such as loan deferrals and reduced payments. Previously, these arrangements negatively impacted your credit score by showing you in arrears. However, under current regulations, as long as you adhere to the terms of any hardship arrangements, your credit score remains unaffected.
Credit scores in Australia vary depending on the reporting system:
– For scores out of 1200: Above 853 is excellent, while above 661 is good.
– For scores out of 1000: Above 690 is excellent, while above 540 is good.
If your credit score isn’t where you’d like it to be, there are steps you can take to improve it. Begin by obtaining your credit report to check for errors and report any inaccuracies to the credit reporting agency, providing necessary documentation.
– Lower Your Credit Card Limit: Reducing your available credit can positively impact your score.
– Limit Credit Applications: Multiple credit applications can negatively affect your score, so apply sparingly.
– Timely Payments: Ensure you pay your rent or mortgage and bills on time.
– Manage Existing Loans: Pay off existing loans, including credit cards, promptly each month and try to pay more than the minimum amount due.
The first step to improving your credit score is to request your credit report. Monitoring this important number can help you understand your financial standing and take necessary actions to improve it and help you get an Australian home loan.
If you’d like to discuss how to position yourself for the best mortgage deal, please give us a call. At Specialist Mortgage, we’re here to guide you through every step of securing an Aussie home loan, ensuring you’re in the best possible position to achieve your property goals.
However, the term of a home loan doesn’t have to be as long as the contract suggests. By adopting some smart strategies, you can pay off your mortgage faster and alleviate this significant financial burden sooner.
One effective strategy for immediate savings is switching from monthly to fortnightly repayments of your home loan. By paying half of your monthly amount every two weeks, you end up making the equivalent of an extra month’s repayment each year. This simple adjustment can significantly reduce the interest you pay and shorten the life of your loan.
To illustrate this, take a couple with a $500,000 home loan at a variable interest rate of 6.66% per annum. Their monthly repayments are $3,213. By switching to fortnightly payments of $1,607, they would pay off their loan more than six years sooner and save around $160,000 in interest, assuming the interest rate remains constant for the term of their loan.
Utilising unexpected windfalls such as a redundancy payout, inheritance, tax return, or work bonus to make lump sum payments can also help you pay off your Aussie mortgage faster. While these payments won’t lower your regular repayments, they will reduce the principal amount, thus saving you on interest and shortening your loan term.
Giving your mortgage a health check might reveal better rates or lenders. Refinancing to a lower interest rate can save you money, and if you continue making the same repayments you were previously on a higher rate, you can reduce the loan term. If you have at least 20% equity in your home and a good credit score, you’ll have more leverage when negotiating with lenders. Be mindful of hidden costs such as application fees, valuation fees, and potential break fees. It’s best practice to engage with a professional to assist with this option who can negotiate on your behalf.
Combining your savings and mortgage through an offset account can reduce the interest you pay. By keeping your savings or salary in an offset account with a redraw facility, you can lower your interest payments while still having access to your funds. The more you have in your offset account, the greater the savings and the faster you can pay off your loan.
Want to be mortgage-free sooner? Contact us at Specialist Mortgage. We can help you explore these strategies and tailor a plan that suits your unique circumstances, potentially saving you thousands and helping you pay off your home loan faster.
It is essential for both residents and expatriates to understand their obligations regarding land tax to ensure compliance with Australian tax laws.
Australian residents are subject to land tax on properties they own, including their primary residence, investment properties, and vacant land. The specific land tax thresholds, rates, and exemptions vary across states and territories, as each jurisdiction has its own legislation governing land tax. Resident landowners are generally required to pay land tax annually based on the assessed value of their properties.
Expatriates who are non-residents for tax purposes may have different land tax obligations. Non-residents are generally subject to land tax on properties they own in Australia, such as investment properties or vacant land. The land tax thresholds, rates, and exemptions for non-residents may differ from those applicable to residents. It is important for expatriates to be aware of the specific rules and requirements in the state or territory where their property is located.
One significant difference in land tax treatment between residents and expatriates relates to the principal place of residence exemption. In many Australian states and territories, the principal place of residence is exempt from land tax for residents. However, expatriates who have turned their former principal place of residence into an investment property may not be eligible for the exemption. The availability and conditions of the principal place of residence exemption may vary across jurisdictions, and expatriates should seek professional advice to understand their specific situation.
Some states and territories impose an absentee owner surcharge in addition to land tax for properties owned by non-residents. This surcharge is an additional levy on top of the standard land tax rate and is intended to capture properties owned by non-residents who do not contribute to the local economy on a day-to-day basis. The surcharge rate and conditions vary across jurisdictions, and expatriates should be aware of this additional obligation if applicable to their property ownership.
Expatriates who are non-residents and foreign nationals may be subject to additional taxes and obligations related to foreign ownership of Australian land. The Foreign Investment Review Board (FIRB) oversees the rules and restrictions on foreign ownership of Australian properties. Non-resident expatriates who fall under the FIRB guidelines may need to seek approval for property ownership and comply with any specific tax requirements imposed on foreign owners.
Both residents and expatriates are responsible for complying with land tax requirements and reporting obligations. This includes accurately assessing the value of their properties, submitting annual land tax returns, and paying the applicable taxes within the specified timeframe. Failure to comply with land tax obligations may result in penalties and interest charges.
Given the complexities and variations in land tax legislation across states and territories, it is advisable for both residents and expatriates to seek professional advice from the experts. They can provide guidance on the specific land tax rules and obligations that apply in the relevant jurisdiction and help navigate the complexities of land tax compliance.
Residents are generally subject to land tax on properties they own, while expatriates who are non-residents may also have land tax obligations. Considerations such as the principal place of residence exemption, absentee owner surcharge, foreign ownership rules, and state-specific regulations add complexity to land tax management. Seeking professional advice and staying informed about the specific requirements in the relevant jurisdiction are key to ensuring compliance and effective management of land tax obligations.
You have an exciting but somewhat challenging time ahead of you. If you are feeling a little daunted by the prospect, the good news is there is help at hand.
Buying a home is certainly one of the biggest financial commitments you’ll make in your life, so you need to go into a property purchase feeling confident and informed. While we will of course be there for you every step of the way, we’ve also compiled some of the best sources of information and support for you to access.
Although residential home values are falling across most of the country, it is still quite a challenge to come up with a deposit. While the rule of thumb is a 20 per cent deposit, some savers buy with a 10 per cent or 5 per cent deposit and either pay lenders’ mortgage insurance (LMI) or use a first home buyer scheme that allows low-deposit purchases but waives LMI.
In any case, that all-important deposit can be a significant sum to save but there are some valuable tools that can assist you. There are many online calculators such as this one that can help you determine how much you’ll need, and what you can afford.
To get a hand with the savings side of things there are a heap of apps to help you get a handle on and manage your financial situation. Frollo is a free budgeting app that you can use to sync all of your financial accounts, create a financial goal – like saving for a deposit – and track your progress.i
We are also here to let you know how much you can borrow and what your budget and deposit will need to be.
The finance side of things can be tricky to navigate alone, and we can assist you to find the best deal and navigate the process and necessary paperwork. There are also several government grants and schemes available for first-home buyers both at the national and state level and we can assess what schemes you may be eligible for.
To save you time and effort in your search for the perfect property, online real estate websites often have profiles of different suburbs and towns. Real estate institutes offer property data that lets you compare sales prices across locations.
It allows you to get to know the real estate agents in the area where you want to buy, let them know what you are looking for and have your name added to their mailing lists.
The purchase of property is still summarised by the Latin phrase ‘Caveat Emptor,’ meaning ‘let the buyer beware’. This puts the onus on the buyer to ensure they are satisfied with the condition of the property before signing the contract.
A house inspection can be an easy way to discover any potentially expensive problems.
Ok, so you’ve found that dream home and your offer has been accepted by the vendor. The next step is signing a contract and arranging the transfer of ownership. Lawyers (for example, a solicitor or a conveyancer) are generally used to make sure all legal obligations have been met by the buyer and the seller.
We are also here to help you manage your finance and settlement deadlines and then to guide you through the life of the loan if you need a hand with any aspect of your borrowings.
Wishing you the best in achieving your property dreams in 2025. Please get in touch at any stage if we can be of assistance.
Here are some of the extra costs that you’ll need to consider when you take out a home loan.
Most lenders charge a home loan application fee. The fee will depend on the loan you are applying for and the lender. Home loan application fees cover:
To learn more about the hidden costs of buying a home, talk to us today.
Perhaps you work for yourself, have recently moved jobs, taken time out of the workforce to raise a family, or your credit history isn’t squeaky clean.
Rest assured that there are still loan options to suit your circumstances, which a broker is well positioned to help you access. Here is the rundown on some options you might not have considered.
Non-conforming loans are suited to people whose situations aren’t clear cut and therefore are likely to face barriers when applying for traditional loans. They provide an opportunity for people – such as freelancers, those at the end of their careers or who are returning to the workforce – to access financing.
One type of non-conforming loan is known as a low documentation (low doc) loan. These are geared towards people who are self-employed – who have an income and assets, but who may not have all the documents usually required for a loan (such as years of tax returns and income statements).
Instead, a self-verification process is in place, where you sign a declaration stating your earnings. As the name low doc suggests, the reduced documentation needed for these type of loans enables borrowers who wouldn’t usually be able to provide the required information to access a loan.
It’s a misconception with this type of loan that you don’t have to provide any documents, however. As well as submitting an income declaration form, you will likely also need to provide your bank statements and a letter from your accountant which confirms your financial standing. You may also be asked for your ABN, a BAS statement and GST registration details, if applicable.
It’s not the most appealing name, but this type of loan is geared towards people who have difficulty qualifying for a loan due to their credit score. It can also be an option for people with little to no credit history, for example those who have never had a credit card.
If you have a credit score of lower than 700, traditionally a bank would consider you too high a financial risk to approve. This type of non-conforming loan can help you access funds.
Generally, bad credit loans only allow you to borrow a small amount of money, so you’re unlikely to be in a position to make a big purchase, such as property.
It’s also worthwhile knowing that non-conforming loans (including low doc loans) often come with higher interest rates than traditional home loans – this is because they are deemed to be riskier for the lender. Therefore, they may have a risk fee attached to them and there might also be stricter loan terms, such as larger deposits required.
As explained with bad credit loans, the amount you can borrow is less than with a traditional loan. Another factor to consider is that as non-conforming loans aren’t very common, you’re likely to be limited in terms of your choice of lender. Finally, even non-conventional loans aren’t guaranteed – not all applications are successful.
There is a common misconception that you don’t require much documentation for these types of loans, which is not the case. While your circumstances may be more complex than a straightforward application, you will need to be able to show your income and capacity to make the repayments for your potential loan.
As with a traditional loan, you’ll be required to complete an application form and generally speaking at a minimum you will need to provide a copy of your ID, bank statements and proof of income.
Non-conforming loans can be beneficial but they’re not the right choice for everyone. Having the assistance of a broker can help you navigate the different loan options and find the best fit for your circumstances.
If you don’t tick all the boxes when it comes to applying for a home loan, we can guide you through the application process and can help find the right solution for your circumstances.
It’s tough scraping together a deposit, it’s not easy dragging yourself to one open-for-inspection after another (especially if you’ve been doing it for a while!), and it can be soul destroying being pipped at the post when you have set your sights on a particular property.
Then there is getting the finance arranged – faced with a bewildering array of options and a load of paperwork to complete, the process is yet another part of home buying that can be hard yakka.
Let’s look at the ways we can lighten your load when it comes to the finance side of things, so you can focus on the search for your dream home – and the purchase.
Many people put the cart before the horse when they start looking at property. It’s easy to get excited and start looking around as soon as you’ve decided to bite the bullet and buy, but unless the numbers have been crunched and you know how much you can borrow, you might be wasting your time.
That’s where a broker comes in handy as we can review your situation and let you know how much you are likely to be able to borrow. We’ll take the time to get to know you and your situation. Our depth of experience means we can assist even in complex circumstances. For example, you may not have a steady income or be running your own business, you may have an unusual employment situation, a poor credit history or other issues that might make applying for a loan more difficult.
Then once we’ve crunched the numbers, we can start looking at your finance options.
When it comes to loans, there is a myriad of products to choose from, which can add up to one big headache unless you have someone to help guide you in the right direction.
We can do all the legwork for you, to compare the different loans available. We have access to more deals and lending products than if you went to a single bank or provider, and we will outline the pros and cons of different loan options and work with you to determine the right finance option that suits your circumstances.
We can then help you obtain a prequalification so you have a clear picture of your borrowing power and can commence negotiations with confidence.
We are also experts in this area so we are up to date with all the government support currently available to home buyers and can help you make sense of all the schemes out there and decide if you are eligible and if so, which would be the best schemes to assist you.
The paperwork for a loan application can be complex and there is a danger of your application being rejected if you get anything wrong. That’s a situation you want to avoid, as every rejected loan or credit application puts a black mark on your credit history which can make it even harder to get a loan in future.
We can work with you to address any issues with the paperwork before you get to the application stage to maximise the chance of your application being successful.
It can be good to have an expert on your side through the process. We have relationships with all the lenders we work with and can get involved to negotiate on your behalf or do what we can to ensure an application is processed in a timely manner.
We’ll be with you through the entire process and celebrating with you on the other side. We are here for you at any point even after you’ve purchased, should you wish to review your loan or the terms of your loan, or look at refinancing.
Please feel free to contact us to talk about any aspect of your Australian mortgage or expat home loan requirements – we are here to help.
But why not think about your goals for next year now? If you are thinking of buying a property, get a jump-start on the new year and be ready to buy by starting the pre-approval process and doing your research now.
If you haven’t already, prepare a budget so you have a clearer understanding of your purchasing power. Calculate your monthly income, subtracting your monthly expenses and any debts – this will show you the amount that’s left over, so you have a clearer idea on what you can afford for your monthly mortgage payments.
We have a great budget tracking calculator you can use here
Keeping track of what’s going into your bank account (income, payments) and what’s going out (expenses) can also identify what you can cut back on – such as forgoing the daily café coffee or cancelling some subscriptions or memberships.
While setting a budget can be a simple process, it can also be a good opportunity to get professional advice during this stage. A broker can shine a light on things you may not have thought of, as well as provide a realistic perspective on what you can afford.
It is also worthwhile starting the pre-approval process, if you’re looking to buy early in the new year. Having a pre-approval shows the seller that you are serious and can give you a leg-up on the competition. Also known as conditional approval, pre-approval gives you an indication of how much you will be able to borrow, which can help you when it comes time to bid.
You will want to get your paperwork ready including your ID, payslips, and bank statements in order to submit an application form.
It’s generally free to get pre-approval. But keep in mind that pre-approvals expire – they are generally valid for three to six months – so this step is for when you’re closer to being able to buy.
Now is also a great time to do your research. If you know which area you’re looking to buy in, research how the area is performing (realestate.com.au/sold/ is a great resource). You can also refer to real estate institute websites as they list data such as the top growth suburbs by median house and unit prices. As well as researching online, get out and attend some auctions, especially in the locations you’re interested in.
It’s also worth narrowing down your needs and wants for a property. Most of us need to compromise somewhat given the cost of housing, so be realistic, but also be clear on what is a must – do you need a certain number of rooms, a backyard, parking spaces, etc? Are you able to buy a fixer upper and renovate or do you need move-in-ready?
Look into what government initiatives are available to you as a buyer, such as the Regional First Home Buyers Support Scheme or the First Home Buyer Scheme. State Government websites contain helpful information on the current schemes and grants.
If you have an existing property, prepare a plan for selling. You will need to give yourself time to spruce up the property if needed, style it, have photos taken and put it on the market. Again, this is a good time to research the market as well to see what similar properties in your location are selling for.
If you didn’t buy the home of your dreams this year, try not to get discouraged, but also be realistic. As there have been significant increases in the cash rate which have flowed onto interest rates, it might be a time to re-evaluate where and what type of property you can now reasonably afford. Whatever your financial situation, we can help you start the process to prepare to buy in the future.
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