Dual income property in Brisbane South - 6.55% Yield

This new release is situated in a booming area with the population growing at an average of 4.6% a year. A long term capital growth rate of  6.73%/year. And a long term rental growth of 3.5%/year.

The property is only 1.3km to the local school and 2.4km to the main shopping centre.

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What is the loyalty tax?
Loyalty tax is a tax on loyal bank customers. It refers to the higher interest rates paid by existing home loan customers compared to new customers.
It is not a tax in the traditional sense, but rather a premium paid by existing customers.
The difference in interest rate paid exists because banks offer larger discounts to new customers compared to the lower discount offered to existing loyal customers.

How big is the loyalty tax for home loans?
According to the Australian Competition and Consumer Commission (ACCC)’s Home Loan Price Inquiry – Final Report, the average difference in interest rates paid by new and existing variable rate customers was:

• 0.29% for borrowers with home loans less than 1 years old.

• 0.47% for borrowers with home loans between one and three years old.

• 0.58% for borrowers with home loans three and five years old.

• 0.71% for borrowers with home loans five and 10 years old.

• 1.04% for borrowers with home loans greater than 10 years old.

As you can see, the difference increases the longer you stay with a lender.
 

Significant potential savings for borrowers
Borrowers are leaving significant potential savings on the table.
For example, if a borrower with a home loan of $500,000 switched to a home loan with an interest rate 58 basis points lower than their existing loan, they would save over $2,800 in interest in the first year and save over $34,000 in interest over the remaining term of the loan.
 

How do I avoid paying the loyalty tax?
The only way to avoid paying the loyalty tax is by shopping around and negotiating with your lender.
Existing home loan customers have two options before them, namely:

• Requesting a lower rate: Customers may be able to obtain a lower rate on their current loan simply by calling their bank. Look at interest rates offered to new customers by your lender as well as a few competitors. Then contact your lender and tell them you’re paying too much. If they don’t offer you a decent rate, go somewhere else.

• Refinancing: By refinancing to a new loan or a new lender, customers can take advantage of larger discounts which are usually not available for existing loans.

Why aren’t more people refinancing?
Refinancing seems like the logical choice but why are customers preferring to remain with their existing lender and get a smaller price reduction compared to what they could get by refinancing?

The initial cost of refinancing is minimal compared to the thousands of dollars that you may potentially save on interest and other fees over the life of the loan period.
And in some cases lenders offer cashbacks which can offset refinance costs.
The primary roadblock seems to be that customers do not have the inclination to spend time and effort to make the switch.

Refinancing isn’t as complicated as it used to be plus you have already been through the process when you first bought the property. This time there is no contract of sale to go through, no solicitors and real estate agents to talk to.

Are you paying a loyalty tax?
If you’ve been with your bank for more than 3 years, you’re likely paying too much.

It's easy to find out. Take our quick quiz now.

A major frustration for property investors is having to reset their interest only investment loan every 5 years.

If you have an investment loan you would be aware that most lenders only allow an interest only period of 5 years. After that it automatically converts to principal and interest repayments. Which can see your repayments jump by 20-30%.

The only way to get your loan back on interest only is to go through the whole application process again with your current lender or try to refinance.

Given the series of rate rises we have experienced this has become very difficult for many investors.

The beauty of this loan is the IO period is 40 years. No reviews. No need to make additional payments. At expiry you can either pay the loan out from super or other funds or sale of the property.

This means you have extra cash for other things like paying down your home loan, putting extra money into super, or even funds for another investment.

Find out if you Qualify

Reality Check

Apartments and townhouses will no longer be developed in Brisbane’s suburbs zoned low-density residential.

The call to “protect the Brisbane backyard” triumphed, with a vote passed by Brisbane City Council to remove provisions allowing for multiple dwellings on blocks of more than 3,000 square metres. Read full article here

Three non-major lenders have announced reductions to their mortgage rates of up to 32 basis points, despite out-of-cycle rate increases from competitors.

If you are not relooking at your lending you are paying too much.

If you want to start making some savings I have opened up my calendar for a FREE telephone appointment to see what you could save. Make a time with me now for an initial 10 minute telephone chat. 
 
 
I look forward to speaking with you soon


Greg Carroll
MORE THAN ACCOUNTANTS
Make a time now for an initial 10 minute telephone chat.

Brisbane came out on top among the strongest performing capital cities in Australia in 2018, simply because its growth remained positive.

As prices tumbled in Sydney and Melbourne, Brisbane’s housing market continued its well-worn path of solid, modest growth. By December, Domain data showed the median house price had increased to $670,000. Read full article here

Brisbane remains a rising market and there's some good news for regionals as well

New data from Queensland’s ports shows coal exports have hit a new high. Total coal exports for 2108 were 223 million tonnes (mt) surpassing the previous record by 2 mt set in 2016.

The results demonstrate the coal industrcy remains a significant contributor to the states economy. Read full article here

Queensland’s population is expected to hit 5.789 million by 2027 and 6.693 million by 2042.
 

Currently sitting at just over 5 million that means nearly 800,000 people (or nearly 89,000 a year) over the next 9 years.

The question is where will this additional population live? Which areas will experience the fastest rates of growth? And where will the job opportunities emerge? 

These type of insights can greatly assist investment decisions. And are just some of factors we consider when weighing up a property investment strategy for a client.

But property investment isn't just about where the opportunities are. It also requires an approach that properly considers your current circumstances and your future plans. 

As many investors have found just jumping in the market and hoping is not a sustainable strategy.

Right now I am opening up my calendar for a FREE telephone appointment to discuss how you can kick-start a sustainable investment plan in 2019. So book in a time today. Click here to go to my calendar now.

I look forward to talking with you

Greg Carroll
07 3849 9822
MORE THAN ACCOUNTANTS