JANUARY 2020

Also known as Positive Credit Reporting, CCR makes recording positive information on credit histories mandatory. The rollout started with Australia’s Big Four (1) banks, which were required to share all their credit data by the end of September 2019. By July 2021, all financial institutions offering loans will have to be complying with CCR; but what does it mean for potential borrowers?

Historically, a person’s credit report or score was all about bad marks. However, the introduction of CCR, which determines whether an individual is financially responsible or not, completely changes the story from a financial institution.

Firstly, thanks to the positive credit data now being tracked in credit reports (bills paid on time, low balance on credit cards, debts paid off, etc), financial hiccups will become easier to recover from.

But more importantly, responsible consumers should see their credit scores get even better, giving them more leverage when negotiating a product from a financial institution.

As lenders will have a broader understanding of an individual’s ability to repay debt, they will be able to assess their risk profile more comprehensively.

Previously, when applying for a home loan, banks and credit providers would only look at your ability to service the mortgage; in other words, your income. That was before the introduction of Comprehensive Credit Reporting (CCR). Now, borrowers are assessed on their full financial history including income, expenses, defaults and even the person’s record and reliability to pay a bill on time.

2020: The year of the everyday Australian

This change will in-turn see mortgage providers start chasing the “good pupils”. They will want to attract and retain the safest borrowers, the ones who appear to be financially healthy, but who are not necessarily the ones with the highest income or buying power. Thus, we will see the power progressively shift from banks to borrowers. The financially mature, responsible consumers will finally get a chance to be rewarded for their good marks.

New opportunities will arise for individuals able to prove healthy financial behaviours. By showcasing a good credit score, they will have the power to capitalise on competition to negotiate better rates, borrow more, and potentially secure their dream house.

With these changes in mind, people who might not be ready to buy in 2020, but who are planning to invest in the next five years, should anticipate their move.

How? By making sure they do everything in their power to improve and maintain the highest credit score possible. This way, when the right time comes, they will be in the best position to negotiate the terms and rate of their future home loan.

(1) Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CommBank), National Australian Bank (NAB), Westpac.

H A P P Y N E W Y E A RWhat’s in store for 2020?

Let us help you achieve your real estate goals.

ljhooker.com.au/rental-appraisal

Disclaimer. This newsletter does not necessarily reflect the opinion of the publisher. It is intended to provide general news and information only. While every care has been taken to ensure the accuracy of the information it contains, neither the publishers, authors nor their employees, can be held liable for inaccuracies, errors or omission. Copyright is reserved throughout. No part of this publication can be reproduced or reprinted without the express permission of the publisher. All information is current as at publication release and the publishers take no responsibility for any factors that may change thereafter. Readers are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this newsletter as a substitute for professional advice. © LJ Hooker Corporation Limited.

Are you looking to buy an investment property, but not sure where to start? Here are some helpful steps to assist you through this important process.

Property Investing Steps

Review Your Personal Cash Flow and Budgets

An important step is understanding how much cash you have to invest in property and whether you can afford the cash flow impact of owning an investment property. This can be as simple as listing all your assets including incomes and working out your expenses. Work out how much you have as a deposit (making sure you don’t over commit), or how much you will need to save for a deposit.

Contact a Home Loan Specialist and Get Pre-Approval

Once you understand your personal cash flow and budget the next step is to talk to a home loan specialist to find out how much they would be prepared to lend you and what the interest rate would be. It is recommended that you get pre-approval for an amount so you can go searching for a property knowing where you can purchase and what type of property you can purchase e.g. a house or apartment, new or old.

Set Your Goals

What are your goals? What are you looking to achieve? It is important to be clear about these and talk to experts such as your accountant and financial advisor. You need to consider your short and long-term goals. For example, if you are looking to retire in 10 years, perhaps start with a 10-year plan then break it down to five years, yearly, bi-annual, monthly and weekly timelines. This will help clarify what you need to achieve through your investments.

Find a Conveyancer or Lawyer

Most property investors enlist the services of a conveyancer or solicitor to handle the purchase process on their behalf. While you are able to act on your own when making a property purchase, the process of documentation and settling can be complicated - and may seem daunting. Bringing in support and assistance from a qualified expert familiar with legal documents and legislation can make the process easier.

Create a Property Evaluation Model

By now you have clarity around how much money your lender will give you, your accountant has verified your budgets and you have the legal support team ready to go, but you don’t know exactly the type of property you are after. This step is all about creating a property evaluation model to identify what criteria in an investment property that is important to you. To do this you need to rank your key investment criteria such as the location - does it need to be near public transport, schools, shops, work and what is the walk score? What do you value as important for the exterior and interior of the investment such as the type of building, size of complex, parking, number of bedrooms and bathrooms? These steps help you to clarify exactly what you are looking for and will enable you to assess potential investment properties against your must have criteria.

Speak to your local LJ Hooker Property Manager to find the right investment property for you.