Home Loans

Owning a home

The ins and outs of home ownership and how to get on top of the costs associated with owning and running a home.

Buying a second property

If you already own a house, there are plenty of reasons why you might consider buying another property. Utilising the equity in your current home is one way you can finance that second property.

What is home equity?

The equity in your home equals the value of the property minus how much you still owe on the mortgage tied to it.

For example, if your property is worth $500,000 and you still owe $350,000 on your mortgage, your home equity is $150,000 ($500,000 – $350,000). All else being equal, if the market value of your property goes up, your home equity goes up, and vice versa.

How to access your home equity to buy a second property

There are several ways you can use your current home equity to help finance your second property, including:

  1. Refinancing your home loan. If your property’s value has increased, you may be able to refinance your mortgage based on this new value, which then allows you to withdraw cash based on the equity you’ve built up. If you’re considering this option, it’s best to familiarize yourself with the pros and cons of refinancing.
  2. Taking out a line of credit. These loans provide access to a set level of credit based on your home’s equity. You can use funds up to this set level and interest is only charged on the amount that you use.
  3. Taking out a reverse mortgage. Reverse mortgages allow buyers to borrow against their equity, but don’t require any repayments while they still live in the home. Instead, the interest compounds over time, and they only have to repay the balance in full after having sold the property or passed away. People under a certain age may not qualify for a reverse mortgage.
  4. Considering cross-collateralisation. This option allows you to use the equity in your home as security for other loans on one or more properties. It is not without risk, however. If you can’t service the debt on one of the loans, you could risk losing more than just the one property.
  5. Taking advantage of your home loan redraw facility. A redraw facility lets you access extra repayments you’ve made on your home loan. Each lender has different ways to redraw and different rules on when and how much you can access through this facility (if any).

How to save money around the house

Australian households pay some of the highest electricity prices in the world. With an average household spend of $2,800 on electricity and gas each year, one way you can slash your energy bills is to become more energy-efficient. Below are some handy tips to getting on top of your energy usage.

Saving money on heating and cooling

Here are several ways to save on heating and cooling that don’t always have a dollar figure attached to them:

  • Replace the filters on appliances regularly to maintain optimal efficiency
  • Make use of sunlight for heating, and keep it out on warmer days
  • Opt for carpets if you require more heating than cooling throughout the year
  • Keep doors and windows closed while the air conditioner is on
  • Consider ligher paint colour for your exterior to reduce heat retention on warm days
  • Shade the house by growing more plants or trees

Saving money on hot water

Some of these tips for saving money on water might seem small, but together they can lead to some nice savings year-to-year:

  • Take shorter showers, which should last no longer than 5 minutes
  • Choose showers over baths, which often use up more water
  • Use a more efficient showerhead with 3-star AAA-rated or higher for a more efficient water flow
  • Lower the temperature of your showers since hotter water costs more
  • Wash clothes with cold water
  • Fix leaking taps to avoid wastage and unnecessary costs
  • Switch off the hot water heater if you’re away

Saving money on appliances

Whether it’s in your kitchen, the bathroom, the living room or the laundry, there are plenty of ways to save on your electricity bills:

  • Set your fridge to about 4-5oC and your freezer to -15oC as each dridge degree colder uses 5% more energy
  • Use your microwave over your stove, which uses 80% more energy
  • Choose gas stoves over electric stoves, which can be less energy-efficient
  • Keep a lid on pots and pant when in use
  • Avoid using dryers as drying laundry outdoors can save between $40-$80 a year
  • Switch off devices when you’re not using them, such as your TV, game consoles, computers, etc.
  • Only use the dishwasher when it’s full
  • Use smart power boards, which allow you to put multiple appliances on stand-by at once, preventing them from draining power all day

How to save money on renovations

The average Australian spends around $25,000 on house renovations, according to the Australian Bureau of Statistics (ABS), while the average reno costs between $600 to $2,700 per square metre.

If you’re on a shoestring budget or simply want to save money, these cost-cutting tips could help you save money on the costs of your home renovation.

  1. Refurbish and re-use. Where things aren’t broken, consider cosmetic upgrades over replacing with something new.
  2. Don’t move the plumbing. Moving anything involving electrical or plumbing fixtures can cost considerably more.
  3. Consider cheap cosmetic fixes. If your budget doesn’t extend to making structural changes, simple cosmetic changes such as installing new lighting or change the window furnishings can instantly make your home feel new. You can also make a big impact through affordable updates like paint.
  4. Improve the layout. Removing a wall or two can open up your living spaces, adding value to your home. The key is to avoid load-bearing walls.
  5. Do it yourself. Consider diy for jobs that don’t require any special skills, like painting or ripping up carpet. Don’t hesitate to ask for help from friends and family either.
  6. Use cheaper materials. This is an easy win as it will save you money and doesn’t have to affect the overall aesthetic of the home.
  7. Build a contingency into your budget. It’s important to take into consideration surprises that could incur unexpected costs such as asbestos, mould, shoddy wiring, etc. Having a buffer in your budget to account for these means you won’t need to skimp on other areas.

Selling your home: what to consider?

If you’re considering selling your house, the question of whether or not you should seek assistance from an agent has probably made its way onto your checklist. To help point you in the right direction, below are a few pros and cons of selling your house privately.

Pros and cons of selling your home privately

Pros
Cons
  • Saving tens of thousands of dollars in agent’s commission
  • You know your home and the neighbourhood better than most, so you’re well placed to point out the benefits
  • You can also save money on the costs of marketing and advertising the property
  • You are in control of one of the most important financial transactions you’ll ever make
  • You open yourself up to risk if you don’t understand the legal requirements
  • You may not have time to do the job properly
  • You risk not selling your home for what it’s worth
  • You’re emotionally invested, and may not be able to be objective when selling
  • You don’t have the database of potential buyers that a real estate agent has
  • Buyers might try and negotiate you down because they know you’re inexperienced

Tips on selling your home privately

If you have decided not to engage a real estate agent, here are some of the steps involved in selling your own home.

  1. Get the property ready for sale. Fix what’s broken, clean up and out, renovate and repaint to add value if need be. This ensures that potential buyers will leave with the best impression of your home.
  2. Decide on the property’s value. Research the market thoroughly to get a realistic idea of how much your property is really worth.
  3. Prepare the listing. The most effective and popular way to get your property in front of potential buyers is to list it online.
  4. Organise inspections. Arrange some general ‘open for inspection’ times when buyers can come and view your home.
  5. Negotiate with a buyer. Once you have received an offer, be prepared to negotiate.
  6. Get a lawyer to finalise the contract. Once you have come to an agreement on price, it’s highly recommended that you enlist the help of a solicitor or conveyancer to organise the contract.

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