Buying a house is probably the biggest financial commitment we make in our lives, so it's not a decision to be taken lightly. 

Most people need to borrow money to buy a house. Although this is obviously important, there is more to buying a house than just money. There are personal and lifestyle goals to consider.

Renting means you only have a week-to-week financial commitment and the flexibility to move with little cost. On the other hand, owning your home can give you security, ownership of an appreciating asset and potential tax-free capital gains when you eventually sell. This is definitely a personal decision nobody can make but you.

Here are some thoughts to help you weigh up what’s best for you.

How long do you plan to live in the house?

Depending on your circumstance, it might not make much sense to go through the hassles and set-up costs of buying a house if you are only going to live there a short while. This is unless you have done sound research and plan to renovate extensively to sell at a much higher price. When you buy and sell within a short timeframe, you can run the risk of a financial loss, especially when you factor in costs like stamp duty.

What is your comfort zone?

Can you really afford the repayments on the loan? Just because you can borrow the money doesn't mean you have to. Can you live the lifestyle you want and afford the repayments? If travelling, starting a family or other lifestyle commitments are important to you, then maybe you should consider a less expensive house and smaller loan. The mortgage is just part of your own financial puzzle – it shouldn't take over your life.

How do I get a loan?

Applying for a loan can be a harrowing experience. You'll be asked all sorts of nosey questions – income and savings (or lack thereof), debts (like credit cards) as well as other assets (shares, managed funds, cars, boats, etc). Be prepared to disclose all, and always tell the truth.

Ideally you need a deposit of a least 20% of the value of the house to avoid mortgage insurance (an extra charge to protect the lender, not you, if you default on the loan). Lenders will be more impressed if you saved the deposit because that shows you have financial discipline. 

Lenders want to see that you can repay the loan and will look at how much of your income it will take up. They will also be interested in your credit rating – your track record of paying bills on time. 

Your house will become collateral for the loan. If you fall too far behind on the repayments, the lender can repossess the house and sell it. They will take this step only as a last resort but it means you are out on the street. And even worse, it will be very hard to ever borrow money again.

Where do you go to find the best loan? 

If you decide to buy, this is probably the most confusing question. Talk to a mortgage professional about the options currently available to you. Weigh up the pros and cons and make your decision wisely.

Call (02) 4926 2300 or email us. 
To discuss buying v renting call the team at Leenane Templeton, we are here to help. 

The post buying v renting appeared first on Newcastle Financial Planners & Financial Advisors.

Self-managed super funds (SMSFs) are the largest and fastest growing super sector in Australia and for many good reasons. But before you start an SMSF, it’s important to weigh up both the advantages and disadvantages and consider seeking advice to determine whether an SMSF is right for you.

The advantages

SMSFs can offer a number of features and benefits generally not available with other super options.

More investment control

You can establish your own investment strategy and directly control where and how your super is invested.

More investment choice

You can select from a wider range of investments including all listed shares, some unlisted shares, residential and business property, and collectables such as artwork, stamps and coins.

One fund for the family

You can set up a fund for yourself and up to three other people and consolidate your super balances. This could enable you to invest in assets of higher value than if you set up a fund with fewer members, achieve greater estate planning flexibility, and reduce fund costs.

Borrow to make larger investments

Your SMSF could make a larger investment in assets such as shares and property by using cash in your fund and borrow the rest.

Tax savings

With SMSFs you can take greater control over the timing of tax events, such as, starting a pension without triggering capital gains tax when your superannuation assets move into pension phase. You may also have the option of transferring assets that you own into your SMSF.

Greater estate planning certainty and flexibility 

You can nominate who you would like to receive your super when you pass away, without having to meet some of the constraints that apply to other super funds.

The disadvantages

While an SMSF can offer greater opportunities to take control of your retirement savings, there are some potential disadvantages you should also consider.

Higher costs for lower balances

SMSFs generally only become cost-effective if the fund has $200,000 or more invested. This is particularly true where you outsource and pay for most or all of the fund administration.

Greater responsibility

When you set up an SMSF, you and any other fund members will generally need to be trustees (or directors of the corporate trustee) and will be responsible for meeting a range of legal and other obligations.

Harsh penalties for breaches

The Australian Tax Office has the authority to impose various treatments to deal with SMSF trustees who have breached super laws. These include:

• requiring trustees to complete certain educational requirements within certain timeframes
• disqualifying an individual from acting as a trustee or director of a corporate trustee
• imposing significant administrative penalties on individual trustees and directors of corporate trustees of up to $10,200 per breach
• applying through the courts to impose civil and criminal penalties, and
• giving notice to a trustee to freeze the SMSFs assets where it appears that their conduct is likely to adversely affect the interests of beneficiaries.

Time consuming

You will need to have enough time, knowledge and skills to manage your own super and meet your legal and other obligations.

You should seek professional advice or guidance from your financial planner when deciding on the best superannuation solution for you. It is recommended that you also seek advice from a registered tax agent to determine the tax implications before setting up an SMSF.

Call (02) 4926 2300 or email us. 

To speak to our expert SMSF team about whether an SMSF is right for you, please call Leenane Templeton today! 

The post Is an SMSF right for you? appeared first on Newcastle Financial Planners & Financial Advisors.

To renovate or upgrade – which is best? This article discusses the advantages and disadvantages of renovating a home compared to upgrading to a new one.

Most of us will live in two or three family homes during our lives. You might find that over this time our needs change as does our capacity to meet those needs. So when the time comes for a move; is buying a new home a good idea, or is spending money on the existing home a better option?

By renovating you save the hassle and stress of moving to another home and location, plus the considerable expense involved. Alternatively, buying a new home could require tens of thousands of dollars just to cover agents’ commission, government charges, legal fees and removal expenses.

However, don't automatically think that renovation will necessarily increase the value of your property.

Generally, renovations that increase the size of the home will add to its value, while cosmetic features may not. Features that can add real value include:

• Additional rooms – bedrooms or office
• Adding a garage
• Re-modelling kitchens and bathrooms
• Landscaping to reduce maintenance.

At the other extreme, swimming pools are noted for being poor investments. They take time and money to maintain, particularly with the increasing cost of water. Also, a prospective purchaser may not want a pool, so you limit your buyer market.

You should also consider your location. Home values tend to be based upon others in the district and even if you have extra features it may be more difficult to sell if the asking price is higher than others around you. Don’t make the mistake of making your property the best house in the worst street.

As always, doing good research is essential to making robust financial decisions and our accountants and financial advisors are at hand to help with any questions you may have in relation to whether to renovate or upgrade.
Call (02) 4926 2300 or email us.

Disclaimer

If you wish to discuss whether the best option for you is to renovate or upgrade from a financial perspective and to discuss your short and long term goals, please do not hesitate to contact our award winning team here at Leenane Templeton.
 

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