Whether you’re looking to upgrade or downsize your home in 2015, a key part of the decision process should involve financial advice from either your financial planner or accountant.
Cameron Morcher, a Private Client Adviser at Prime Financial Group, who has more than 11 years’ experience advising clients believes despite home ownership being one of life’s biggest investments – many don’t seek proper financial advice.
“Buying a home is of course a very emotional decision which needs to be counter balanced with plenty of planning, research and careful budgeting,” Cam said.
“It’s important to look beyond the front door and ensure the property matches your future plans and you stick to your limit, especially given today’s buoyant market.”
“Purchasers need to think about how long you want to hold the property for, whether you plan to renovate, sell or turn into an investment property and the possible tax consequences of these decisions.”
Another big consideration that Cam advises clients on is the ability to make repayments if their personal circumstances change, even if the change is short term.
“While interest rates are at 50 year lows, they won’t remain there forever so people should ensure they can afford to make repayments with at least a 2 per cent increase to rates. Another consideration is having enough reserve funds to cope if they become redundant or have to rely on a single wage.”
Cam says getting advice from a financial planner or accountant before you purchase helps determine how much you can afford, whether competitive rates from lenders can be negotiated and if the investment matches your current financial position.
On the subject of interest rates at a 54-year low, Cam often gets asked whether ‘it’s time to fix?’
There’s a sound rationale that if you fix your rate now you could be locking in the interest rate at the lower end of the cycle. However, if you’re feeling unsure, one option is to split your loan so that a portion is variable and the remainder is fixed.
One issue with fixed loans is they can become restrictive and limit the number of additional repayments you can make as well as making it difficult to refinance before the end of the fixed term. Opting for a fixing only a portion of your loan may mean you can continue to make extra repayments into the variable component of the loan.
Cam remembers one client who had recently decided that they wanted to fix half of their loan for 3-5 years so that they had some certainty in their budget and to remove some of the risk of rising mortgage costs if interest rates were to rise. The client left the remainder as a variable rate loan so that they could pay this down quicker with savings or upon receipt of any bonuses or any other unexpected windfalls.
To tap into more professional advice before or once you purchased your home, contact Cam on 03 8825 4737 or