You might know by now that both Ren and Bryce are in the process of trying to buy their first homes. It’s not only a significant milestone, but it’s also a complex process that can be overwhelming. In today’s episode of Get Started Investing, we had an enlightening discussion with Andre, a seasoned mortgage expert, who shared invaluable advice for first-time homebuyers.
Here’s 5 takeaways that can help you navigate the home-buying process more effectively:
- Understand Your Borrowing Power
Before you start house hunting, it’s important to understand your borrowing power. Many first-time buyers make the mistake of going for the maximum they think they can afford, only to find out later that they’ve overlooked ongoing costs like strata fees. Knowing your borrowing power helps you search for a property that fits within your budget – ensuring you don’t get carried away and end up compromise your standard of living. - Don’t Rush: Do Your Homework
The excitement of buying a property can make it tempting to rush into decisions. Andre’s advice? Don’t let FOMO (Fear Of Missing Out) or YOLO (You Only Live Once) dictate your actions. Take the time to do your homework, which includes understanding the market, reviewing contracts, and checking strata reports. Rushing can lead to costly mistakes! - Get Professional Help
More and more property hunters are turning to buyer’s agents to help with the process. A good buyer’s agent can help you find the right property quickly and negotiate a better price. They can also assist with essential tasks like reviewing contracts and strata reports, ensuring you don’t overlook any critical steps. It could be worth considering hiring a buyer’s agent, especially if you’re struggling to make progress on your own. - Pay Attention to Insurance
Insurance is often an overlooked aspect of home buying. Andre emphasised the importance of remembering that you’ll likely need property insurance, title insurance, contents insurance, and if you’re buying an investment property, perhaps landlord insurance. These insurances protect you from unforeseen circumstances and it’s a forgotten element that you should look at factoring into your budget. - Be Smart About Repayments
How you make your loan repayments can impact the amount of interest you pay over time. Andre suggests aligning your payments with your pay cycle and making payments as soon as possible to reduce the interest accrued. In the episode he details how making repayments sooner can impact the interest you’ll be charged.
Those are only 5 of our takeaways from our chat with Andre from Ubank. Make sure you listen to the episode wherever you get your podcasts to hear more!
6 ways to invest for kids with Glen James
“I have a baby on the way, what’s the best way to invest in shares for a baby or kids?”
Benjamin Brooksby via Instagram
Thanks for the question Benjamin. We actually asked Glen James from My Millennial Money to join us on Equity Mates Investing Podcast yesterday, and he went through 6 ways you can invest for the kids in your life. Of course, please do your own research and consult a professional, but here are his 6 ways:
- In Your Own Name
Investing in your own name offers flexibility and low hassle. The income generated is taxed at your marginal tax rate, and there’s no need for a Tax File Number (TFN) for the minor. However, transferring assets like shares to the minor later on could attract Capital Gains Tax (CGT). And you’ve got to remember, you’ll need to consider estate planning to make sure the money goes where you intend if anything happens to you. - Informal Trust
The advantage of this approach is that having a dedicated account can prevent you from spending the money. It’s also a low-cost option if you’re using index ETFs. The downside is that it may require more paperwork and could have a potentially higher tax rate for the minor, depending on what decisions you make! Australian Tax Office (ATO) provide guidance on this option here. - Investment Bond or Education Bond
Investment bonds are internally taxed at company rates, and there’s no need to include this in the owner’s income tax return. After 10 years, withdrawals are generally tax-free to the beneficiary. Glen has one of these himself for his nieces and nephews – that’s not a recommendation btw – but he goes through how that works in the episode. - Superannuation
Superannuation accounts for minors are taxed internally at a rate of 15%, and these accounts offer a tax-effective long-term investment environment. However, there are legislative risks, and the money is locked until certain conditions for release are met. - Formal Trust
A formal trust involves more complexity and administrative work. The money would need to be distributed to the minor and would be taxed at the minor’s tax rate. This option doesn’t require a transfer when the minor turns 18, as they would just become an adult beneficiary. However, it does require annual tax returns for both the trust and the minor. - Lastly – investing in experiences!
Instead of giving kids money, Glen talks about how he focuses on teaching them how to manage and grow their own money. Then, instead of putting cash in a trust or investment vehicle, he spend the money instead on spending time and making memories with his nieces and nephews. After all, those are the things they’ll think about in the years to come.
Do you invest for your kids or kids you know
No judgement here, we’re just curious!
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