Where to invest after paying off your mortgage

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After finally paying off your mortgage, many would say that it’s time to crack open that bottle of champagne and celebrate.

But now that you have money to spend (rather than save), you’ll inevitably be left asking the question: “What do I do with all my leftover money?”


Money management facts

With high house prices, the idea of owning a home and having a mortgage has become less popular. According to the Australian Bureau of Statistics (ABS), the number of Australians owning their homes was reduced by 66% in 2017-18. Conversely, the number of households opting to rent increased to 32%. The percentage of households who owned a home with a mortgage had also increased to 37%.

With mortgages sucking up a substantial amount of money, statistics are showing that Australians do not have large savings. In fact, the household saving ratio reached an 11-year low when it fell to 2.6% in 2018-19.

It comes at no surprise that surveys have revealed that many Australians still struggle with the task of managing their finances. A 2018 ASIC report showed that 1 in 5 Australians had reportedly not saved money over the last six months, and 12% struggled to accumulate enough money needed to fund their expenses.

However, Australians who have paid off their mortgage are said to be more budget-conscious. Rather than spending their money on unnecessary items, a 2019 survey showed that Australians with mortgages are spending over 30% of their disposable income on their mortgage, which experts are attributing to ‘mortgage stress’. The survey also showed that owners/occupiers of homes with a mortgage experienced the lowest levels of financial comfort.

Investing your mortgage money wisely in 2020

However, managing your money when you’re free of a mortgage can be just as stressful. There are so many options when it comes to what you can spend it on, and it’s often too easy to fall into the trap of splurging on unnecessary holidays and shopping sprees. While it’s good to treat yourself once in a while, it’s important to think long term. These tips give you some ideas on how you can manage your funds wisely in the New Year.

invest-paying-off-mortgage

Invest in property

Numerous people elect to invest in property because they can touch and see their investment. Furthermore, they can track how their wealth is growing.

Another benefit is this type of wealth requires minimal capital investment on your part. You also have to pay very little off the mortgage as your tenant pays the majority for you.

Property investment can reduce the tax that you pay using a negative gearing strategy. This philosophy increases your residual income further while you are working. Then, when you are ready to retire, you can choose to sell your assets to fund your retirement. Alternatively, you can sell some of your investment property. The money can then be used to pay off others so you can live off the rental income.

Make the most of low interest rates

Buying an investment property now, when interest rates are at an all-time low, means you can make your money work harder for you. Nevertheless, many investment advisors suggest having a buffer that covers at least 6 to 12 months of the mortgage. Applying this strategy will protect you against any interest rate rises and also reduce your financial risk.

As many Australian homeowners say, there is no secret to paying off your mortgage, it just takes diligence and discipline. Hence, you can also apply this strategy to your investment property so that you build greater retirement wealth. Just remember to plan and set yourself goals before jumping into property investment.

Buying the right investment property

Once you have outlined your plan and set goals, it’s time to look at what’s available. Traditionally, houses have higher capital growth than apartments. Yet, apartments and units have a higher rental yield. For this reason, many investors choose to buy a mixture of property, as this diversifies their investments. Ideally, you should purchase property that meets your needs long-term.

invest-paying-off-mortgage

Invest in shares

Despite all the disheartening reports of an impending recession, there is still time to invest in shares and not lose out. Consider buying shares in a company and then selling them for profit when the time is right. You may also get extra money from dividend payments. According to strategists at Macquarie Group Ltd, investors should consider buying shares in stocks with rising earnings. Contacting a stock-broker may also provide you with useful guidance through this process.

Strengthen your retirement funds and savings

Use any extra money you have to contribute to your superannuation fund. Contributing more to your superannuation sooner will pay off in the long run due to the interest that is accumulated. It will also be wise to use your money to pay off any existing debts such as credit card debts, and once this is done, creating specific savings accounts for any savings goals that you are working towards. It may also be handy to set aside some money as a ‘safety net’ in case of any emergencies.

Words by Vidya Kathirgamalingam

Contact eChoice today and make your property investment dreams a reality! Our experienced brokers can help you to find the perfect mortgage deal.

Supporting the purchase of a property alone is a demanding and taxing journey. You might not have enough money for a deposit or have enough borrowing power for the property you want. Even once immediate costs like a deposit and stamp duty are met, monthly repayments generally persist for decades.

It’s in circumstances like these, people consider buying an investment property with family or friends, also known as coownership property investment.

Coownership property investment is where you and family or friends enter into a joint ownership agreement known as a tenantsincommon. This type of agreement allows you to buy an investment property sooner and to build your asset pool faster.


The Benefits

It’s easier to raise money

Rather than years of saving for a deposit, coownership can reduce this to months.

The 20% deposit you need to save to buy an investment property can be divided among coowners. For instance, if you need to save $80,000 and three friends are interested in coownership, then you each only save $20,000.

You can collate your borrowing power

The assets, income and other financial commitments of all coowners are taken into consideration when calculating borrowing power. This means you can possibly borrow more. Joint owners are seen as less risky by lenders as there are multiple people in an agreement who can step up should one fail.

Shared costs

The most enticing factor is the sharing of the pricetag. All costs are shared between coowners. This includes the purchase price, legal fees, stamp duty and conveyancing, as well as mortgage repayments and maintenance.

The Disadvantages

The disadvantages can be enough to stop a joint venture altogether. Here are some factors to consider.

Legal advice is a must

Before you coown an investment property, seeking legal advice is a non-negotiable. Failure to seek legal advice can be costly in the chance things turn sour.

Therefore, make sure you have a solicitor draw up your coownership agreement, setting out everyone’s expectations, rights and obligations. Most importantly this agreement will be binding in court.

Less rental income

The income generated by the coowned investment property is shared, meaning reduced profit.

Disputes

Relationships can change and fast. In fact, many relationship breakdowns are due to money or property disagreements.

For this reason, it’s best to appoint a conflict resolution manager who does not have a vested interest in the property. This will take the emotion out of disagreements and make the situation less volatile. This should be done right from the get go.

It’s harder to treat is as a business

It’s much harder to stay objective when you’re close to your coowners. Risking hurting the feeling’s of loved ones can leave you staying silent on what you think is right or what you want.

Consider the risks

What if one person wants to sell and others don’t? You will need to map out potential disagreements to avoid surprise in the future.

Common disagreements are on:

  • selling the property
  • buying a party out
  • refinancing
  • splitting income and costs
  • mortgage repayments
  • one party not pulling their weight

Credit rating

If one coowner falls behind on a mortgage repayment, all owners will have their credit rating negatively affected.

Interested in knowing more on coownership or looking to buy an investment property with family or friends? Contact eChoice for tailored advice from mortgage brokers with access to 100’s of products and lenders.

When you have a mortgage to pay off, it’s easy to feel like you need to go on complete financial lockdown. This can make it difficult to spend on often necessary things like home improvements or a new car, or to build additional wealth through investing. However, homeowners are actually in a unique position to access capital through the equity they already own from paying back their existing home loan.

This is because they are eligible for the home equity loan, an often untapped source of no deposit home loans. Read on for your ultimate guide to this kind of loan, including what it is, how you can apply for it and how to know if it’s right for you.

When many of us buy a property, we do not think about the property’s home equity and how this will grow over our years of ownership. Instead, we only focus on the amount we owe on the home, and how we can pay this off. But, the truth of the matter is this unused equity can be used to help you grow your wealth, providing you take advantage of it when the going is good. A home equity loan or equity loan enables you to borrow value that you’ve acquired in your home.


What is a home equity loan?

Home equity is the difference between what your home is worth and the amount you owe on your mortgage. A home equity loan allows you to access funds by borrowing against this balance through a lender.

How-Home-Equity-Works-graphic

Do I qualify?

If you have an existing property and have paid off more than 20% of your mortgage, you should be eligible for this loan in Australia. However, a poor credit score or encumbrances against your home (such as tax liens) may affect the outcome of your application.

How much can you borrow on a home equity loan?

The amount you can borrow depends on your property’s current market value and how much you have remaining on your home loan.

For example, if your home is worth $700,000 and there is $300,000 remaining on your home loan, you have home equity worth $400,000. However, you can only access up to 80% of this amount before you will be charged for Lender’s Mortgage Insurance (LMI). Often amounting to thousands of dollars, this is a flat fee designed to protect the lender in the event you default on your payments.

Can I use a home equity loan for anything?

Yes, it’s entirely up to you what you spend your loan on. However, most borrowers use them for larger investments, such as home renovations, purchasing a new car, funding their business or building an investment portfolio. The loans are also commonly used for consolidating larger debts, such as your mortgage and credit card.

What is my mortgage repayment?

$1,514
/month

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What’s involved in getting a home equity loan?

There are various steps involved in securing this type of loan. Firstly, you must calculate how much equity is available to you. You do so by subtracting the balance of your current loans from the estimated market value of your home, based on a real estate valuation or comparable properties in your area.

Then, you must determine the amount of equity you actually need and can access. Some key considerations here include:

  • How much you can borrow without incurring the Lender’s Mortgage Insurance
  • How much you actually need to borrow to achieve your goals
  • How much you can realistically repay on time, in light of your current financial situation and expenses

Once you have determined the amount of funds you would like to unlock, it’s time to review your loan options.

At this point, it’s wise to contact one of eChoice’s qualified mortgage brokers. They will be able to assess which loan type and lender is right for you and help you minimise the fees involved. They will also be able to help you lodge your application. As well as providing documents like identification, proof of income and tax statements, you may also need to provide evidence for the purpose of your loan.

This may include:

  • Debt consolidation: A recent statement confirming each of the debts you are repaying
  • Purchasing another property: A copy of the contract of sale for the property, or a letter from your conveyancer confirming that you are looking for a property
  • Buying shares: A document outlining your financial plan or statement of advice from a financial planner or your accountant
  • Buying a property: A letter from your conveyancer confirming you are looking for a property or a copy of the contract of sale when a property is found
  • Renovations: A copy of the building contract or quotes from the contractors you are using
eChoice-2018-home-equity-loan-guide

What are the benefits?

Home equity loans have many unique benefits which make them an attractive lending option. First, they tend to have a lower interest rate than credit cards and other types of personal loans.

Another major selling point is the loan’s flexibility. You can use a home equity loan for any purpose and access it whenever you need. The funds can usually be easily accessed via ATM card, online banking or cheque. In many cases, you also don’t need to repay it until you reach your credit limit. You also have the flexibility to make additional payments on the loan at any time, to get it paid off faster.

What are the disadvantages?

As with any type of credit, home equity loans aren’t without their pitfalls. There are often additional costs involved, including the Lender’s Mortgage Fee and opening or closing costs. The flexibility of home equity loans can also be a downside for those who aren’t financially disciplined. If you take a long time to repay your loan, you may accrue a large amount of debt on top of your mortgage.

Is it hard to get a home equity loan?

If you have paid off at least 20% of your mortgage and don’t have any encumbrances against your property, securing a home equity loan should be relatively quick and easy. However, it can become more of a challenge if you have a poor credit rating. So, what credit score do you need to get a home equity loan? While there’s no hard and fast rule, a credit score lower than 620 may present additional challenges. You may want to work on improving your credit score by paying back all current financial obligations on time.

Can I get a home equity loan if my house is paid off?

Yes, if you have paid off your home in full, you are in a favourable position to get a home equity loan. However, you will still only be able to access 80 to 90% of your home’s value.

How long does it take to get this type of loan?

While it depends on your specific financial situation and the amount you are borrowing, it generally takes around 30 to 45 days to secure this loan type.

Do most homeowners use the equity in their home?

Many Australian homeowners have more equity in their home than they realise, and do not use it to their advantage. However, it’s important to note that home equity loans are not for everyone, and you must have strong financial management skills to avoid getting into further debt.

Is it better to refinance or get a home equity loan?

Home equity loans and cash-out refinances are similar, in that they allow you to access the equity you have accumulated in your home. However, a cash-out refinance replaces your current loan with a new term, while a home equity loan is an additional payment to make. So, how do you know which one is right for you? It depends on your mortgage rate. If you can get a better  interest rate on your mortgage rate and get additional cash-out, refinancing may be the way to go. If the current rates are higher than your existing mortgage rate, a home equity loan may be the more suitable option.

Which is better: home equity or personal loan?

Home equity and personal loans both come with their own advantages and disadvantages. Home equity loans generally have much lower interest rates than personal loans. They are also usually spread out over a much longer period of time – 25 or 30 years, compared to a maximum of seven years for a personal loan. However, personal loans tend to be easier to manage, as they generally have minimum monthly repayments you need to pay in order to keep up with them. If you are looking for a flexible lending solution and are financially disciplined, you may save some money in going for a home equity loan. Otherwise, you may want to stick to another type of personal loan.

eChoice-2018-home-equity-loan-guide

Which is better: home equity loan or line of credit?

There are typically two types of home equity loans – a lump sum cash loan or a line of credit loan. A lump sum loan allows you to receive a lump sum for an investment or project. However, you will start paying interest immediately on this type of loan and for the full sum borrowed, even if you haven’t used it for its purpose.

Conversely, a line of credit loan is separate to your existing home loan, but is taken out against your property. This type of loan works like a giant credit card, where you can draw out the funds as needed. Therefore, you only pay interest on the amount of money that you have used. This method gives you greater flexibility, but it may also attract higher interest rates, and can be a trap if you do not manage your spending. It’s best to chat to your broker or financial adviser to determine which type of loan is for you.

What is the difference between a mortgage and a home equity loan?

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A mortgage is the initial loan you take out from a bank or financial institution, in order to purchase your property. Meanwhile, a home equity loan is a loan you can take out after you have paid off 20% of that mortgage and have equity in the property.

Are there closing costs on a home equity line of credit?

As with other mortgage loans, there are closing costs associated with both home equity loans and home equity lines of credit. The amount will depend on your specific lender, and the amount you have borrowed.

Do these loans hurt your credit?

A home equity loan may slightly decrease your credit score, but generally not enough to impact your ability to secure future loans. In a study, LendingTree looked at data from 2500 consumers to determine how their credit scores changed in the months after they took out a home equity loan.

They found that their scores declined by around 13 points, which would have a negligible impact on the average credit rating of 735. So, provided your Home Equity Loan application isn’t rejected and you make your repayments on time, it’s not likely to significantly impact your credit score.

Can you have two home equity loans on the same house?

Technically, it is possible to have two lines of credit on the same home. However, you would need to ensure you have enough equity in your home to support the loans. As home equity loans are flexible in terms of how and when you spend them, it’s also unlikely you would need to take our two separate lines of credit for different purposes.

How can I pay off my home equity loan faster?

You can pay off these loans faster by making additional payments each month, or by refinancing the debt to avoid variable interest rates.

Do you have to pay back a home equity loan?

Yes, just like any type of credit, you must pay back this loan within the timeframe laid out in your terms. Failure to do so can result in legal action or in a lender taking your property as payment. However, you generally have a much longer time to pay back a home equity loan, as well as more flexible terms around repayment.

Are you looking to purchase a home equity loan? Our experienced brokers have access to hundreds of home loan products, so we can help you find the right lender for you.

A sharp shift from the deeply creative, mystical, night sky-inspired hue of 2018’s Pantone Colour of the Year, this year’s pick – Living Coral – has been dubbed “an animating and life-affirming hue that energises and enlivens with a softer edge.”

Providing a visual and timely reminder to get back to what matters and put less investment into the digital technology and social media that have wormed their way firmly into our daily lives, the colour standards company’s colour of the year, PANTONE 16-1546 Living Coral, is briefed with encouraging us to “seek authentic and immersive experiences that enable connection and intimacy.”

Think that’s a big call for a colour to achieve? In a press release, Pantone says – drawing from nature – PANTONE 16-1546 Living Coral emits the desired, familiar and energising aspects of colour found in nature, with its peachy shade of orange and golden undertones.

“In its glorious, yet unfortunately more elusive, display beneath the sea, this vivifying and effervescent colour mesmerises the eye and mind. Lying at the centre of our naturally vivid and chromatic ecosystem, Living Coral is evocative of how coral reefs provide shelter to a diverse kaleidoscope of colour,” says Pantone spokesperson, Leatrice Eiseman.

The release goes on to spruik the merits of the lively hue, calling it vibrant, yet mellow, embracing us with warmth and nourishment to provide comfort and buoyancy in our continually shifting environment.

“Representing the fusion of modern life, Living Coral is a nurturing colour that appears in our natural surroundings and at the same time, displays a lively presence within social media,” Eiseman says.

It’s also charged with being sociable and spirited, engaging, welcoming and encouraging light-hearted activity – not to mention symbolising our innate need for optimism and joyful pursuits, embodying our desire for playful expression.

A quick flick through various web design and colour psychology pages from around the web lends consensus to the claims that the colour coral evokes feelings of softness, playfulness, nurturing, and good health.

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pantone colour of 2019
Image source: Pantone

How was the Pantone Colour of 2019 chosen?

Far from a random selection, the colour boffins at the Pantone Color Institute have spent the last 20 years seeking out their annual colour du jour through a selection process involving trend analysis and consideration to a wide range of fields and factors.

These influences include the entertainment industry and films in production, travelling art collections and new artists, fashion, all areas of design, popular travel destinations, to new lifestyles, playstyles, and socio-economic conditions. They’ll often also look to new technologies, materials, textures, and effects that impact colour for inspo, and the relevant social media platforms and upcoming sporting events that capture worldwide attention.

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The Pantone Color Institute Color of the Year has developed into a powerful force over its 20 years – partnering with global brands to leverage the power, psychology, and emotion of colour in design strategies. The annual ‘chosen one’ influences product development and purchasing decisions in multiple industries – from fashion, home furnishings, and industrial design, to product, packaging, and graphics.

In short, expect to see plenty of coral in gift shops, upcoming clothing collections, makeup boxes, magazine and web pages – not to mention paint and furniture fabric swatches!

Words by Melanie Hearse

Whether you’re selling or buying a home, a property valuation is essential. Not only does it let you set a fair price relative to the market when selling, but as a buyer, it also gives you an indication of competitive pricing.

But when you’re buying, your lender may also wish to have the property valued, which is when differences between valuations occur. But how does a bank valuation differ from a market valuation and why are they required?

What’s a bank valuation?

When you take out a loan to buy a property, your lender needs to determine their level of risk. To assess this, they conduct a bank valuation and an independent valuer will be employed to assess your home value. The valuer doesn’t base home value on a fair market price and instead values the property based on what the lender could recoup if they had to repossess, and then sell, your property in a distressed market.

Bank valuations are usually lower than you’d reasonably expect to receive if you put your home on the market yourself because lenders want to protect themselves from a financial loss should you default on your loan. By valuing your home at a lower price, they’re able to calculate debt recovery, including any additional expenses, such as legal fees and real estate commissions, with a quick sale in mind. Then, if they value your property at less than market value and it still covers the costs should you default, then typically this will get you a step closer to loan approval.

How does a valuer work out a bank valuation?

A formal valuation is carried out by a qualified valuer who is trained to focus on the features of a property such as:

  • Location and the aspect of the property.
  • The condition and structure of the building.
  • Any building faults.
  • Home features and improvements.
  • Property caveats or encumbrances.
  • Local government zoning.

While your lender may order the formal valuation, often it’s you who will pay the fee associated. Formal appraisals cost between $100 to $500 per property and your lender usually keeps any information collected about your property.

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When do I need a bank valuation?

Bank valuations are carried out to ensure you don’t borrow more than your property is worth. This lending strategy safeguards that your home, which is your loan security, is adequate to cover the lender’s risk.

How is the valuation carried out?

A valuer will first arrange a time to visit your property. Once there, they’ll measure your home and make notes on the building structure, condition and any faults. They’ll also note the property layout, number of rooms and bathrooms, as well as the fit out and any changes made to the property that add value.

Home improvements tend to include extensions, landscaping, solar systems, water tanks, shedding and swimming pools. Often the valuer will take photos of your property and take note of its relative location. Then, the valuer will research planning restrictions and council zoning, before looking at comparable sales in your area. After the valuer has conducted this research, they’ll produce the magic figure.

bank valuation

How does a market valuation compare to a bank valuation?

In comparison to a bank valuation, a market valuation is the value of your property based on the current market value. Also known as the ‘highest estimated buyer price’, this valuation is an appraisal and has no legal standing.

Market valuations are typically carried out by a real estate agent when a homeowner wants to sell a property. These valuations are based on sales in the area, as well as local knowledge, and are usually free of charge.

What are the major differences between a market and bank valuation?

Market valuation

Bank valuation

Used by property buyers and sellers: Usually, a market valuation is used to determine the value of a property for sale. It may also help a buyer identify whether or not a property has a competitive market price. Overall, the market value of a property gives both buyers and sellers an indication of the perceived value of real estate. Used by banks: Bank valuations determine a lender’s level of risk and also ensure that a property value is high enough to secure a loan. Then, if the borrower defaults on loan repayments, the lender is assured they can recoup their financial contribution to the purchase.
Market-based: Using recent sales data of similar properties, the market valuation takes a snapshot of the market at a specific time and then uses this as a basis to value a property. The buyer and seller can then use this information to negotiate a purchase price. Resale based: A lender looks purely at the resale value of a property, in case they need to sell it quickly. So, the bank valuation isn’t for the buyer, it’s merely for the lender. Thus, most lenders won’t even share the information that they’ve collected about the property.
Higher than a bank valuation: With a seller often having longer to achieve a property’s perceived value, market valuation is typically higher than a bank valuation. Plus, the market valuation is seller-motivated, with the seller often waiting to achieve the amount they desire. Lower than a market valuation: A lender valuation typically factors in selling costs such as legal fees and real estate commissions, based on a quick sale’.

Source: Finder.com.au

Do you want more information about bank valuations and market valuations for your property? eChoice’s expert brokers can help you understand the market and then simplify the process of applying for a mortgage. We have access to hundreds of products, so we’ll find you a competitive rate.


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I am a
living in .

I am looking to buy a property
in .

Looking to buy in Ultimo, NSW 2007.

Roof
Average property price
$1,000,000
Average loan amount
$800,000
Average annual salary
$60,000
Average credit card limit
$2,400
house foundation

This information is a guide only and is an estimate only based on the past 12 months of aggregated online mortgage enquiries from eChoice and partner programs.

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Calculating depreciation on an investment property can mean claiming more at tax time. But, to claim all that you’re entitled to, you’ll need to keep the right records. Here’s how you could reduce your tax using property depreciation.

One of the greatest benefits of owning an investment property is the ability to reduce the amount of tax you pay at the end of the financial year. But if you don’t know what you can claim, you may be missing out on financial bonuses.

To help you avoid this situation, we’ve put together this handy property depreciation guide for you to use anywhere, any time, ensuring you’re claiming absolutely everything you can in relation to your property.

What is property depreciation?

Investment property depreciation is claiming the reduction in the value of items in your asset over their expected life. The life expectancy of items varies from product-to-product. For instance, carpets may have a shorter life expectancy (usually five to 10-years) than tiles, which may last up to 40-years. Therefore, their depreciation differs.

For new property investors, depreciation of items in an asset is like claiming the wear and tear of a vehicle used for income-producing purposes. Due to your investment property generating an income for you, you can also claim wear and tear on items within the property.

Anyone who owns an investment property can claim depreciation: it’s not just for seasoned investors. Financial experts recommend claiming depreciation from the time of purchasing your investment property and, in fact, some seasoned investors will buy an investment property purely for depreciation.

Some investors don’t understand depreciation fully or know what items they can claim. As a result, they may miss claiming thousands of dollars annually, which could have reduced the amount of tax they’ve paid.

How can you claim maximum property depreciation?

To avoid making a costly mistake and claiming all depreciation on an investment property you’re eligible for, financial advisors and accountants recommend getting a professional report prepared by a quantity surveyor.

The report prepared typically includes:

  • Plant and Equipment: These are the items within the property that you own, such as the air-conditioner, oven, carpets, blinds and any other equipment you have purchased. If you’ve renovated the property, then keeping your receipts is a good idea, as new items can have a much higher depreciation value than ones that are a few years old.
  • Building Allowance: Bricks, concrete, paving and outdoor structures such as pergolas fall under this category. A building allowance is only claimable on properties built after a certain date (Refer to the table in the section below).

You might be wondering why you need a depreciation schedule. The answer is it allows your accountant to find all the tax-deductible items easily. So, they won’t overlook any and, consequently, you will be able to claim the maximum amount that you’re entitled to at tax time. Without this schedule, your accountant may miss items.

property depreciation

How is property depreciation calculated?

Depreciation on plant and equipment is calculated using two methods – straight line and diminishing value – and both are Australian Taxation Office approved. These methods are as follows:

  • Straight line depreciation – the worth of the depreciating asset declines consistently over its effectual life.
  • Diminishing value – the depreciating asset’s value declines more in the early years of its effectual life.

Building depreciation, however, is calculated using a scale depending on the type of property that you own. If you own a residential, commercial or industrial property, then these buildings have various cut-off dates. These dates and the claimable depreciation rates are as follows:

Accommodation Type Building Allowance Dates Depreciation Rate
Short-Stay / Holiday 21 August 1979 – 21 August 1984 2.5%
22 August 1984 – 17 July 1985 4%
18 July 1985 – 15 Sept 1987 4%
16th Sept 1987 – 26th Feb 1992 2.5%
27th Feb 1992 + 4%
Non-Residential 20 July 1982 – 21 August 1984 2.5%
22 August 1984 – 15 Sept 1987 4%
16 Sept 1987 + 2.5%
Residential 18 July 1985 – 15 Sept 1987 4%
16 Sept 1987 + 2.5%
Manufacturing 20 July 1982 – 21 Aug 1984 2.5%
22 Aug 1984 – 15 Sept 1987 4%
16 Sept 1987 – 26 Feb 1992 2.5%
27th Feb 1992 + 4%

Source: RealEstate.com.au

Property Depreciation Fast Facts

There are many questions that investment property owners ask about property depreciation. Some of these are:

  • Can a depreciation claim affect capital gains tax? You’ll only be affected by capital gains tax when you go to sell your investment property. But, just remember that you can only claim expenses once annually on your property. Thus, if you’ve already claimed these in the financial year of sale, then you won’t be able to claim them again. Consequently, this may affect your capital gains claim.
  • Should my accountant prepare my depreciation report? If your property build date was after 1985, then legally your accountant is not able to prepare your depreciation report. Under Tax Ruling 97/25, only quantity surveyors are authorised to prepare depreciation reports.
  • Will my property need to be inspected? Typically to have a depreciation report prepared you’ll need to have a quantity surveyor visit your property. Most surveyors will arrange an appointment around your schedule.
  • If I have a renovated property can I still claim depreciation? Yes, but you need to keep renovation receipts as proof of your claim. Also, if you didn’t carry out the renovations, but a previous owner did, you can still claim these using a quantity surveyor.
  • How much does a depreciation schedule cost? The price of a schedule varies depending on the property type, dwelling size and property location. However, these reports generally range from $700 or more.

Are you looking to buy an investment property, but you’re not sure where to start? eChoice’s expert brokers can help you understand the market and simplify the process of applying for a mortgage. We have access to hundreds of products, so we’ll find you a competitive mortgage.


Unlock your suburb's demographic profile

I am a
living in .

I am looking to buy a property
in .

Looking to buy in Ultimo, NSW 2007.

Roof
Average property price
$1,000,000
Average loan amount
$800,000
Average annual salary
$60,000
Average credit card limit
$2,400
house foundation

This information is a guide only and is an estimate only based on the past 12 months of aggregated online mortgage enquiries from eChoice and partner programs.

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As an investor, you want to find the cheapest home loan possible as this frees up cash flow. But, with lenders tightening up their investment portfolios and raising investment loan rates, this is becoming harder to achieve. However, the good news is market conditions are still favourable for investing if you can find the right lender.


Current Market Conditions

Nationally housing affordability is growing due to Australian median home prices falling further and marginal growth in wages. The rise in affordability also coincides with the Reserve Bank of Australia’s (RBA) latest decision to leave the official cash rate on hold at 1.5% for another month.

What’s the bottom line? Well, with the Australian housing market worth $7.3 trillion it makes up a sizeable portion of the Australian economy. Of this market, Sydney and Melbourne make up 60% of the market share. So, price fluctuations in these cities have a considerable impact on what happens across the market nationally, which, in turn, affects the Australian economy and consumer confidence. Consequently, these markets influence RBA rate settings, and the outlook for economic growth.

If you’re currently looking for an investment property, then keep reading.

Why Investing Now Makes Sense

Now, if you’re asking yourself, Why do I want to invest in a slowing market? Then, you need to consider a couple of factors.

  1. Firstly, median home values have fallen. As a result, you can buy property for less.
  2. Secondly, interest rates are still very low. Therefore, as an investor, you’re paying less to buy property.
  3. Thirdly, lower property prices mean needing less of a deposit.

So, given that investing is still favourable, how do you find the right lender and home loan?

Finding the Right Lender

While lenders have divided owner-occupier and investor home loans, and increased investment loan rates, bargains are still on offer. In fact, some lenders have investment loans starting around 3.79%. Of course, rates depend on many factors such as:

  • Amount borrowed – amount you need to buy the property.
  • Property price – value of the property you’re buying.
  • Loan term – number of years your loan is over.
  • Repayment type – principal and interest or interest only.

To find the right lender, it’s important to consider your financial circumstances. Thus, you need to figure out how much you can afford to borrow, what loan features you need, and the interest rate type. Other considerations are repayment frequency, your deposit size and existing assets and debts.

When looking for the right lender, consider the loan range of the product and interest and comparison rate. Also, review the repayment amount and loan-to-value-ratio (LVR), as well as fees. These will help you figure out which lender suits your purposes.

Five of Our Best Investor Loans

There are hundreds of home loans on the market at any given time. So, wading your way through these is a little daunting. But, to help you narrow down your selection, we’ve pulled five of the best investor home loans on our panel out of the mix. These loans show you what is on offer and how little you can pay with the current rates.

The five best investor loans on our panel use the following criteria:

  • Rates – as of 30th October 2018
  • Loan amount – $400,000
  • Property value – $ 500,000
  • Loan term – 30-years
  • Repayment type – principal and interest
  • Loan purpose – investor
  • Repayment frequency – monthly
  • Interest rate type – variable

 

Homeloans.com.au

Homeloans.com.au – Ultra Plus

The Ultra Plus loan product offered by Homeloans.com.au, comes with very competitive interest rates, however, they will vary based on how much you are borrowing and whether you choose a variable, fixed, or both with a split rate loan. Enjoy flexible repayment options and the freedom to pay down your mortgage quickly with unlimited additional repayments, either ongoing or as a lump sum. You do have the option to pay interest only, but keep in mind this choice will come with a rate surcharge. This loan includes the following features:

Features
Interest Rate 3.97%
Comparison Rate 4.13%
Offset Account No
Offset Cost $0
Redraw Facility Yes
Redraw Cost $0
LVR 80%
Annual Fee $0
Monthly Fee $0
Application Fee $0
Monthly Repayment $1,902

 

Suncorp Bank

Suncorp – Back to Basics

Here is a low variable rate loan that can help you own your home faster. You’ll pay no ongoing account fees and have the freedom to make additional repayments or redraw when you want without having to pay any extra fees. This is a popular choice with first home buyers as you can borrow as much as 90% of the property value. This loan includes the following features:

Features
Interest Rate 4.09%
Comparison Rate 4.10%
Offset Account No
Offset Cost $0
Redraw Facility Yes
Redraw Cost $0
LVR 90%
Annual Fee $0
Monthly Fee $0
Application Fee $600
Monthly Repayment $1,930

 

Heritage Bank

Heritage Bank – Discount Variable

For an affordable home loan, Heritage Bank offers a low rate variable loan product with no monthly service fees and one of the lowest rates in the country. While their Discount Variable loan doesn’t include an offset account, you can still pay down your loan faster with unlimited extra repayments. And, when you need to, you can access your additional payments with unlimited redraw. As with all of the home loan products from Heritage Bank, you have the option to take advantage of an interest-only repayment period to give you more flexibility in the first few years of your loan. This loan includes the following features:

Features
Interest Rate 4.14%
Comparison Rate 4.16%
Offset Account No
Offset Cost $0
Redraw Facility Yes
Redraw Cost $0
LVR 80%
Annual Fee $0
Monthly Fee $0
Application Fee $0
Monthly Repayment $1,942

 

Macquarie Bank

Macquarie – Offset Home Loan

You could save a substantial sum by lowering your interest owed with an offset account – Macquarie lets you have up to ten fully transactional accounts with your loan. Combine this with a competitive rate and a Macquarie credit card with no annual fee for the life of your loan and you have a smart home loan for savvy borrowers. This loan includes the following features:

Features
Interest Rate 4.19%
Comparison Rate 4.44%
Offset Account Yes
Offset Cost $0
Redraw Facility Yes
Redraw Cost $0
LVR 80%
Annual Fee $248
Monthly Fee $0
Application Fee $0
Monthly Repayment $1,953

 

ME Bank

ME Bank – Flexible Home Loan

Add a few flexible features to the Basic Home Loan offered by ME Bank, as well as a slightly higher variable rate, and you have the Flexible Home Loan. You can use an offset account to make your loan more affordable and can choose between a fixed, variable, and split rate option depending on which suits your financial goals. This loan includes the following features:

Features
Interest Rate 4.19%
Comparison Rate 4.59%
Offset Account Yes
Offset Cost $0
Redraw Facility Yes
Redraw Cost $0
LVR 80%
Annual Fee $359
Monthly Fee $0
Application Fee $0
Monthly Repayment $1,953

 

Do you want to know more about the cheapest investor home loans available on our panel? Then contact eChoice, we can help you find out what loans you qualify for today. Plus, our brokers have access to 100’s of home loan products. So we’ll help find you a competitive mortgage.

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Things you should know:

The advice provided is general advice only as, in preparing it we did not take into account your lending objectives, financial situation or particular needs. Before making a decision on the basis of this advice, you should consider how appropriate the advice is to your particular lending needs and objectives. Terms and conditions, fees and charges and normal lending criteria apply. Information & interest rate is current as at 30th October 2018 & is subject to change. The comparison rate is based on a loan amount of $150,000 over a loan term of 25 years. WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.


When buying your investment property, it’s vital to keep costs and returns in mind. This perspective keeps property investment real and stops you from getting caught up in the savings hype. Let’s look at investment property tax from both sides of the coin, so that you can work out the costs and how much you could save.


There are many taxes that you’ll attract as a property investor as well as deductions that you’ll be able to make at the end of the fiscal year. Consequently, you need to weigh-up both to find out whether or not buying an investment property is justifiable.

Investment Property Tax Incurred

There are several taxes associated with your property investment. Some are tax deductible, while others are not. The following are the most prominent:

  • Income Tax – Any rent or other monies collected as the property owner is declarable as taxable income.
  • Capital Gains Tax (CGT) – When you sell your investment property, if you make a profit, then you would’ve made a capital gain. The gain made is taxable. Therefore, the profit made adds to your regular income in the year of the sale.

How is capital gains tax calculated?

  • The sale price of your property.
  • Less the purchase price and any buying, ownership and selling costs.
  • If ownership is longer than 12-months, you’re entitled to a 50% gains discount.
  • Your annual income in the year of sale.

Let’s look at an example.

You buy an investment property for $190,000 in 1998. In 2018, you sell this property for $490,000, and your current taxable income is $50,000. The cost to buy the property including stamp duty, tax advice and capital improvements was $47,000. Ownership costs were $126,468 and the costs of selling $23,000. Based on this, the capital gain made was $103,432. Subsequently, the tax payable under the new Capital Gains Regime of a marginal tax rate x half the capital gain is $24,582.

  • Property Tax – Also known as council rates, this tax covers the cost of local government services such as community services and rubbish collection. The cost of this tax varies from council-to-council, so ask about rates when buying to avoid unexpected charges.
  • Land Tax – All state governments charge land tax, excluding the Northern Territory. This tax varies depending on the state of property purchase and is payable only on the land value of the property; hence it excludes any dwellings or improvements. Also, this tax does not include your principal place of residence. To calculate costs of this tax, contact your tax adviser.

What's my borrowing power if I earn $ per year?

Investment Property Tax Deductions

A vast range of expenses that relate to your investment property are tax deductible, so keep sound records and all receipts. However, remember that you can only claim these if the property is an investment that you don’t live in, which is either currently tenanted or available as a rental.

Properties built or renovated to a tenant are exempt from the payment of GST. However, if you’re building to sell for a profit or looking to flip’ the renovated property for profit, then you’re liable to pay GST on the sale; you will also have to pay capital gains tax.

In most cases, the general tax allowances for your property investment are straightforward. These are as follows:

What can I deduct?

  • Tenant advertising costs – Paper, online and billboard.
  • Property management fees – Real estate agent or self-managed costs.
  • Any bank charges – Loan interest and ongoing loan fees.
  • Local government fees – Annual council rates and the emergency services levy and land tax.
  • Strata fees – Grounds maintenance and building insurance.
  • Depreciation – The building structure, lighting fittings, appliances – dishwasher, fridge, and hot water service – blinds, carpet and flooring, and new additions such as a kitchen upgrade.
  • Repairs and maintenance – Gardening, paint, plumbing and maintenance, as well as wear and tear.
  • Insurance – Building and property owner coverage.
  • Stationery – Receipt books, pens, printing, and paper, as well as phone costs.
  • Bookkeeping and accounting – Record keeping and taxes.
  • Legal fees – Conveyancer at the time of purchase.
  • Utilities – Water, gas, and electricity installation, along with ongoing sewer fees.
  • Travel – Costs associated with the inspection of the property.

While this is an extensive list of tax-deductible items, there may be more. Therefore, always consult your accountant before lodging your tax return.


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Looking to buy in Ultimo, NSW 2007.

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Average property price
$1,000,000
Average loan amount
$800,000
Average annual salary
$60,000
Average credit card limit
$2,400
house foundation

This information is a guide only and is an estimate only based on the past 12 months of aggregated online mortgage enquiries from eChoice and partner programs.

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Negative Gearing and Your Investment Property

Negative gearing refers to the situation where the costs of owning an investment property are more than the rental income, resulting in a loss. In this case, the Government allows investors to claim their investment property expenses off their income before paying tax, thus paying less tax.

So, how does it work? Well, when an investor buys a property they incur expenses – loan interest, council fees, etc. – and they collect rent. As soon as the cost of owning the property becomes higher than the rental income collected, the property becomes negatively geared.

For example, let’s say you collect rent of $15,200 a year on your property, but your property expenses are $17,500 yearly. Consequently, this means that your property expenses become tax deductible. So, if you earn $52,000 in this financial year, then your taxable income becomes $34,500. So, you’ll incur tax on this amount.

How does negative gearing benefit me?

  • Reduces your tax.
  • Rental property becomes more affordable.
  • Encourages you to build a portfolio.

What are the risks for me?

  • You’ll have to cover some property expenses.
  • Some payments, such as paying the loan principal are not tax deductible.
  • You need good money management skills.

Not all investment properties are negatively geared. Some rental properties collect more rent than ownership costs making them positively geared. Once this occurs, the profit made on the property annually becomes a part of your taxable income.

So, if you’re purchasing your own investment property and need a property investment loan, contact eChoice and achieve your investment goals faster by speaking to a qualified mortgage broker who can help by gearing your property portfolio with the right investment loans. Our brokers have access to 100’s of products, so we can help you find a competitive mortgage to meet your individual needs.


When it comes to managing money well as an investor, you need to be perceptive and look out for opportunities that could enable you to save more. Having the correct loan structure based on your needs reduces your costs, and lessens your overall risk. Let’s look at how tidying up financial loose-ends and selecting the right loan type and features are important aspects of structuring your loan.


Tidying Up Financial Loose-Ends

As an investor, you will come across many financing options that will either help with your loan structure or will make it more difficult. Some options will enable you to maximise your capital, while others will erode it. So, how do you avoid costly mistakes? One of the most important considerations you’ll make is selecting a loan type and features. But, before doing this, you also need to tidy up any financial loose-ends.

Account consolidation

Most investors will find themselves with multiple bank accounts as these link to their investment properties. Sometimes this will work in their favour, especially if they don’t want all their investment eggs in the one financial basket. But usually, when these accounts are with different lenders, they cost more. Why? Well, most banks offer package deals. These packages put all your everyday banking needs in the one place, simplifying account management and reduce the time needed to balance these accounts. Plus, you can take advantage of discounts and other offers.

What are the benefits of a banking package?

  • Simplifies your banking.
  • Reduces annual fees.
  • Gives you discounts on home lending.
  • Lessens the cost of insurance.
  • Cuts annual credit card fees.

Direct Debit

One of the easiest ways to pay your mortgage is via direct debit. Therefore, if your lender hasn’t set this up, then it’s time to ask. Once setup, it’s then important to check the repayment is correct and coming out of the right account. Just remember that lenders don’t always get everything right.

Why is a direct debit of benefit?

  • Simplifies the repayment process.
  • Maximises time and effort.
  • Cuts down stress.
  • Prevents payment default.

Increase Payment Frequency

As crazy as it sounds, paying the same amount off your loan, but more often, will reduce your interest. How come? Well, paying more often reduces your principal faster. Also, you’ll make an extra month’s repayment as there are 52 weeks in a year or 13 lots of 4-weeks.

How can I reduce my interest?

  • Pay weekly or fortnightly.
  • Slightly increase your repayments.

Now that we’ve covered tidying up those financial loose-ends let’s look at loan types and features.

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Selecting the Right Loan Type

There are many loan types available – principal and interest, interest-only, fixed, or variable rates are four of the most common. Finding the right loan type for you so structuring your loan is effortless is as simple as weighing up the pros and cons, and then considering these loan types in terms of your situation.

What are the pros of a principal and interest loan?

  • The loan repayment begins on the first day.
  • Loan interest over the term is less, as you’re paying off the principal.
  • Borrowing power is higher.
  • Interest rates are often lower.

How can a principal and interest loan disadvantage me?

  • Redraw amounts decrease with the loan size.
  • Repayments are higher.
  • Reduced cash flow can make this loan type unsuitable for investment.

What are the advantages of an interest-only loan?

  • Lower monthly repayments short-term.
  • Higher tax benefits are short-term.
  • Free-up cash to invest elsewhere.

What cons do interest-only loans have?

  • Tighter lending criteria.
  • Higher interest rates.
  • Not all lenders offer interest-only loans.
  • Interest-only terms are not for the full loan term – 3, 5 and 10-years.

What are the pros of a fixed loan?

  • Rates don’t change for the specified term.
  • Repayments are easier to manage.
  • Budgeting becomes easier.

How can a fixed loan disadvantage me?

  • Limits apply to extra repayments.
  • Extra home loan features such as a redraw and offset are not available.
  • Falls in interest rates won’t apply to you.
  • Break fees may result if you sell your home.

What are the advantages of a variable loan?

  • Making extra repayments is easy.
  • More home loan features are available.
  • Switching loans is easier.
  • Greater loan flexibility.

What cons does a variable loan have?

  • Interest rates can change.
  • Repayments fluctuate with the market.
  • Makes budgeting harder.
  • Increases mortgage stress.

To work out which loan type is right for you, crunch the numbers. Many investment experts suggest taking out a variable interest-only loan to maximise tax benefits and increase cash flow. But, you need to work out how much this strategy will cost you compared to taking out a principal and interest variable or fixed loan.

Are you looking to purchase a property or refinance?

Selecting Additional Home Loan Features

You should also consider the following features when structuring your loan. You may be able to reduce your interest repayments even further.

100% Offset Maximisation

Linking your everyday bank account to an offset account reduces your interest. All you need to do is ask your lender to set it up.

How does an offset account work?

  • Deposit all your income into your offset account.
  • The loan principal reduces by the amount held in the offset account.
  • Interest is payable only on the principal, less your account balance.

Redraw Setup

A redraw facility allows you to make extra loan repayments. This money keeps in trust. So, if you need it, you can withdraw it.

How does a redraw help me?

  • Make extra payments when money is available.
  • Your loan principal reduces, and you pay less interest.
  • Withdrawal is available if needed.

Whether you are a first home buyer, refinancer or property investor, it’s important to have the correct loan structure. Contact eChoice and speak to a qualified mortgage broker who can help you achieve the correct loan structure for your property purchase. Our brokers have access to 100’s of products, so we can help you find a competitive mortgage to meet your individual needs.