Tag: Buyer's Agent

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Household Expenditure Measure

Do you know what the Household Expenditure Measure is? If you are buying a property and need a loan, then it is important to know this metric!

Often simply called HEM, it is a standard benchmark that lenders use to assess an applicant’s monthly and annual expenses. It is often used to assess the borrowing capacity of the applicant(s), so is a very important number to have under control!

HEM is an Australian created benchmark, developed by the Melbourne Institute off the back of their annual HILDA (Household, Income and Labour Dynamics in Australia) report. It defines what a typical family unit should be spending each month and therefore each year.

HouseholdIncome < $50KIncome $50-70KIncome $70-85KIncome $85-100KIncome < $120KIncome < $140K
Single – 0 Dependants$1,450$1,765$2,139$2,437$2,819$3,191
Single – 1 Dependant$1,866$2,203$2,576$2,875$3,257$3,631
Single – 2 Dependants$2,352$2,669$3,044$3,344$3,727$4,102
Single – 3 Dependants$2,832$3,150$3,529$3,831$4,216$4,594
Each Extra Dependants$440$440$440$440$440$440
2 Adults – 0 Dependants$2,571$2,887$3,289$3,606$3,942$4,245
2 Adults – 1 Dependant$2,935$3,252$3,654$3,972$4,308$4,611
2 Adults – 2 Dependants$3,238$3,554$3,955$4,273$4,608$4,911
2 Adults – 3 Dependants$3,494$3,810$4,211$4,528$4,864$5,167
Current HEM Monthly Expenses Benchmark (as at December 2023)
Household Expenditure Measure Shopping Bag
Getting your monthly expenses in order is a key action to get a home loan!

Improving Your Household Expenditure Measure

If you are buying a property with a loan, either as an owner-occupier or as an investor (where you are the guarantor), you will need to consider how your expenditure matches the above table. If you are above or below the respective figure for your household, then you will need to explain why to your broker or lender.

Finance lenders expect a borrower to be close to these numbers, although if your expenses are explainable and the loan structure supports the purchase, then most lenders will note the difference and assess the application.

Our broking arm (Astute St Leonards) will provide templates to help you define your expenses as part of a loan application. We can also introduce you to a financial planner if required.

In recent weeks, there has been an increase in media articles about so-called “Liar Loans” where applicants have been less than truthful about their circumstances. It is worth remembering that lenders have access to all the data, so they can ascertain whether the expenses defined are accurate or not!

We are here to help you purchase a property, so get in touch here for a no-obligation discussion! We will help map your Household Expensiture Measure.

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Bridging Loans Ease Stress

A traditional property move means trying to settle on two properties at the same time. Often there is a chain of buyers/sellers all wanting to complete their respective transaction on the same day. No one is really in control. I regularly hear horror stories where one party has a delay that causes issues down the line. Bridging loans ease stress when multiple transactions are in play.

A Bridging Loan uses both the existing property and often the property to be purchased to define the equity requirements of the loan structure. In essence, the borrower will have a loan that funds the purchase of a new property that is then covered partially or completely by the sale. The loan period would be three to six months, allowing the sale of the existing property and then a possible refinance if there is still debt to be covered.

This helps the buyer to purchase the new property, move in and then get the old property ready for sale. It splits the process of the property change-over into three parts: the purchase, the move and the sale. Now, the buyer is in more control of the process and can define the timeframes to suit them. This could help get a higher price for the sale, simply because they can negotiate for longer!

Bridging Loans Ease Stress - enjoy the move without the tears!
Ease the stress of a property move with a Bridging Loan

A Real Example – how Bridging Loans Ease Stress!

During the last COVID lock-down in 2021, my wife and I started to think about the future. We were both in our late 50s and still working. However were not happy with our residential location on the Lower North Shore of Sydney. The apartment building was in excellent condition and we had owned it for about 17 years. The area was earmarked for significant over-development – which meant construction noise, more traffic, more dust and the removal of views in all directions. Importantly, the new buildings would remove all natural light and heat resulting in higher energy costs if we stayed put.

We had recently sold an old renovated house and had some equity locked away. Our primary residence, although in a well-maintained block, showed the signs of 17 years of being lived in and needed some “tlc” to bring it back to a sellable standard. We wanted to use the equity from the house sale to fund some of the renovations and also as part of buying in a suburban area. That meant that timing was an issue – we needed to be out of the first property whilst those renovations occurred. We also needed to use both equities to fund the new property.

The Bridging Loan Solution

The solution was to use a Bridging Loan. The structure was straight forward: a refinance of the existing mortgage and used some of the equity to cover the purchase of the new property. The plan was to end the move debt-free. The loan was for six months and the interest was deducted up front, so no mortgage payments were required. Now we were now able to move on our terms.

We bought the new property on the Northern Beaches. We then had our apartment on the Lower North Shore repainted, smartened up and restyled ready for the market. It sold for more than the bridging loan within a few weeks and we paid out the new loan in full, receiving a credit for the unused interest prepayment! It also left us with enough funds to plan some future property enhancements to suit our lifestyle.

The benefits of using this type of loan included a stress-free move (no time issues), no pressure to get the old apartment spruced up for sale and reduced stress in selling the property because we knew the sale price would cover the bridging loan. Financially we are much better off because we no longer have a mortgage – or any long-term debts – with funds to buy smaller properties that will provide an ongoing income.

The Benefits of a Bridging Loan

It simplified the move and we now live a much more relaxed and quieter lifestyle away from the hustle and bustle of inner city living. It has reduced stress and our health is better for it! Even though we still work, we are doing so in a better environment. Finally, the move means that we can enjoy the community and all its amenities for many years and not have to make the move in later life when it would be even more stressful.

To learn about our finance broking services – how bridging loans ease stress, click here to go to Astute St Leonards. Access our calendar to schedule a no-obligation discussion.

If you are looking for a property to purchase on the north side of Sydney, talk to us about our buyer’s agent services.

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Financial Literacy

This year I have noticed that financial literacy is often lacking in my client interactions. I have spoken with many people looking to buy an owner-occupied property who do not understand what is involved. Specifically, how to apply for a home loan, how the repayments are defined and what the term “security” means.

So it was pleasing to read the following article from the New York Times. It made me think that here in Australia, we need the same classes.

The New York Times Financial Literacy Classes

Financial Literacy Class

Education is the key to Financial Literacy

In my youth, Pink Floyd’s The Wall was a popular album. On the track Another Brick in the Wall, the Islington Green School students sang:

We don’t need no education
Wе don’t need no thought control
No dark sarcasm in the classroom
Teachers, lеave them kids alone

Pink Floyd (Waters, Gilmour, Ezrin, Guthrie)

I respectfully disagree with Pink Floyd. Having grown up in the UK during the 70s when it was in significant crisis with strikes, high unemployment and many economic failures, I do understand the sentiment of the song!

Education is the key to a great future for people of all ages – and there is no reason for anyone to not learn anything!

Having classes in high school that focus students on real world issues such as financial literacy would mean that young adults would be making better decisions about their future. When it comes to buying a home or borrowing what is basically, a small fortune, there would likely be a faster approval. The lenders would consider the borrower as being a good fit for them and may offer a better rate.

If you would like to discuss a home loan and what is needed prior to talking with a broker. Click here to arrange some time to talk with a broker!

If you need help finding a property to live in, then click here to talk with our property Buyer’s Agent.

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Deposit Bonds for Property Purchases

One option for property buyers is to use Deposit Bonds for property purchases. For example, for the initial payment rather than handing over their own funds. This is especially important when buying off the plan or a property to be constructed. In these instances, funds may be handed over six to twelve months before settlement. A Bridging Loan may not have the term length needed to facilitate the transaction, so a Deposit Bond may be a better option.

What is a Deposit Bond?

A Deposit Bond is in effect an insurance guarantee – the holder of the bond is agreeing to provide the full deposit on an agreed date. This helps with liquidating other assets to pay for a deposit or allows the bondholder to retain their funds until the agreed payment date.

Deposit Bonds were first created in Australia in 1988 by the local arm of Royal Sun Alliance (RSA), an insurance company. They owned a subsidiary, Deposit Power who designed the concept which has now gone global. RSA became known as Promina and are now part of the ever growing Suncorp business.

How to use Deposit Bonds for Property Purchases

An example would be: a buyer is looking to purchase a property and doesn’t have the full deposit immediately due to cash in deposits that will be available within a few weeks. They would like to lock in the purchase, so they use a Deposit Bond to pay for the deposit and then within a few weeks have their home loan and cash ready to completed the transaction. The buyer pays the bond issuer and the vendor separately to close all accounts.

Another example would be a buyer of a yet to be constructed house, using a Deposit Bond as the first payment to the builder. They then put their own funds into a high interest short term deposit account to earn some interest. This should match the term of the bond. It may be possible to cover the cost of the bond through the interest earned on the funds locked away.

Unlocking your finances with a Deposit Bond to make property purchases.

Risks Associated with Deposit Bonds for Property Purchases

As with all financial instruments, there are potential risks to be assessed by the bondholder. Firstly, the selling agent or vendor may not accept the bond. Secondly, if the transaction fails, then the issuer will expect the bondholder to cover the full amount of the bond. Finally, the bond issuer may not consider the buyer a good credit risk and may decline the application! Remember, the bondholder is borrowing the funds.

Talk to Madison Wells Pty Ltd today!

Madison Wells Pty Ltd is a finance broker, trading as Astute St Leonards and a property buyer’s agent. We understand the property purchase process intimately and can help define the best finance solution for the purchase.

The first step is to ensure that your finance is in place. You can arrange a time to discuss your requirements by accessing our Calendar here.

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Self Managed Super Fund Property

St Leonards Apartments

A Self Managed Super Fund is a great vehicle to buy property in readiness for a comfortable retirement!

Many people have created a Self Managed Super Fund (SMSF) to better manage their retirement savings plan. This is a great idea when you have the time or an advisor to guide you through the extra paperwork that needs to be filed. Properly managed, an SMSF is a great vehicle to build wealth for future use.

However, many super funds have no property – or only one property – held by the underlying trust. Considering the cost of setting up and maintaining the fund, this could be a waste of the fund’s reserves. The whole concept of the fund is to increase wealth over a long period of time. The fund is under the control of the trustee(s) rather than a large third party super fund.

Super funds are split into two “phases”: Accumulation and Retirement. It is critical to ensure that the accumulation phase is as productive as possible. It is worth noting that there may be a short period where the fund transitions and both phases are active. The advice is always to maximise the accumulation!

St Leonards Apartments suitable for a Self Managed Super Fund
Apartments in St Leonards

Property held in a Self Managed Super Fund

Holding property long term in a fund is a great way to grow wealth over a longer period of time. Although a quick gain in equity may be made, some of that gain will be lost in taxes along with the cost of selling the property. Therefore, consider holding the property longer and using the rental income to pay down any loan required to purchase the property. The goal should be that the property is debt free, before you move into the Retirement Phase.

Many funds bought townhouses in the outer suburbs of major cities which at the time was a great strategy. However, there are some great value studio or one bed apartments close to the city that provide a good rental yield. This market, especially on the Lower North Shore is running red hot at the moment!
It is worth noting that with the current infrastructure boom around Sydney’s North Shore, the ability to rent out an apartment held by an SMSF is strong.

Financial Advice

It is critical to get advice when managing a fund of any kind from a licenced advisor. For advice on starting or managing a Self Managed Super Fund, please talk with our financial advice partner: Apexx Wealth.

Finance Broker – Self Managed Super Funds

Madison Wells Pty Ltd trades as Astute St Leonards, a specialist in providing loan structures for Self Managed Super Funds. There is a growing competitive market within the lending community for these types of loans. This is putting pressure on interest rates and loan policy – to the benefit of the fund and guarantors.

Property Buyers Agent

Stephen Wells, our MD, is also a registered Buyers Agent in NSW. He has access to a wide stock of apartments on the Lower North Shore with rental yields in the 5%-7% range (based on a 60% Loan Value Ratio). Talk to Stephen about the opportunities on the Lower North Shore by booking some time here.

In summary, a Self Managed Super Fund is a great vehicle to build wealth for your retirement. With opportunities to purchase in suburbs close to new public transport infrastructure, any SMSF will benefit from buying now!

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A Buyer’s Agent Will Help you Purchase a New Home

aerial overview of port jackson

Buying a house, whether it is your first time, or something you have done several times in the past, is always a stressful period in anyone’s life. A buyer’s agent will help you purchase a new home and take the stress out of the process – especially if they have a network of professional services behind them to sort out all the niggling problems that arise.

A buyer’s agent is a licensed professional that will do the hard work on your behalf – the searching, evaluating and negotiating during the purchase. The key is that the Buyer’s Agent is on your side whereas a Real Estate Agent is focused on getting the best result for the seller, so in some cases they are caught in the middle wanting to help both sides of the transaction. Clearly the money will come from the seller, so the Real Estate Agent will always swing towards the sale, not the purchase!

Why use a Buyer’s Agent?

1st question: Who should use a buyer’s agent? Well, the answer is everyone!

Think about the process of buying and moving home, firstly, once you have decided on the area to live in, you need to start looking and figuring out the market and where your preferred facilities are, e.g. schools, churches, public transportation etc. All this takes time and effort, which you may need to cram into evenings and weekends thus reducing your downtime and costing money to travel to look at properties.

When you have found the property you want, you then need to start negotationg with the Real Estate Agent to get the price you want – or you have to get into the melee at an auction! Time is a big issue, especially if you have a family to raise and have commitments around their school and sports activities.

2nd question: Why should I use a buyer’s agent?

Clearly the first reason is that it will reduce the amount of time you spend doing all that research. Many buyer’s agents specialise in a handful of closely connected suburbs and they already know what is there and where the best streets are located. They have the local knowledge and can guide you through the whole process.

Buyer’s agents can also get access to the off-market properties, can get more accurate valuations and can access the latest market data, giving you the advice quickly – something that would take months to collated on your own.

Importantly, the network supporting the buyer’s agent can bring independant professionals to the process so that you are always getting accurate information and a quality service.

Jain & Co

Astute St Leonards recognises the value and power of using a buyer’s agent and we have partnered with Jain & Co to help our customers find their dream home. The Principal, Adil Jain, is focused on finding the best property for you, sifting through the clutter and acting as your representative at the auction or negotating the best price.

If you are looking to buy a property on the Lower North Shore (Mosman, Cremorne, Neutral Bay, Willoughby, Castlecrag, Middle Cove, Artarmon, Cammeray, Northbridge, Chatswood, North Sydney), the Northern Beaches (Manly, Freshwater, Balgowlah, Manly Vale, Dee Why, Brookvale, Avalon, Palm Beach, Collaroy) or even Sydney CBD and the Inner West, then give Adil a call on 0415 234 656.

A buyer’s agent will help you purchase a new home, so give Astute St Leonards a call to get a matching loan to help Adil buy your next home!