Domain's Home Price Guide: How much is your property worth?

After launching the Home Price Guide in August, property website Domain.com.au has launched a new feature, Track My Home, which allows property owners to update the details of their property – including recent renovations, extensions and refreshes – to receive a current property value estimate. 

RateCity caught up with Damon Pezaro, Chief Product Officer at Domain, to chat about the Home Price Guide, the new Track My Home feature and the power of knowledge.

 How has the Home Price Guide changed the way properties are bought and sold in Australia?

Domain’s award winning Home Price Guide is a new way for every Australian home resident to find out valuable information about their home like how much it’s worth, whether they own or rent. It aims to empower Australians with information that has been hard to get previously, informing them about things like estimated value, the timeline of their property (including sale and rental history where available), sharing historical listing images and find out other important info like school zones, for any home in Australia.

Real estate agents will always play a key role in appraising your home and adding contextual information, with the Home Price Guide empowering Aussies with easy access to data and helps them make more informed decisions. Its latest feature, Track My Home, allows property owners to update the details of their home, to receive an updated property value estimate helping them to ensure they are making the right property decision at the right time.

What are the key features of the app that empower users?

Knowledge is power, and there are different features that will help different people based on their situation. For renters, Home Price Guide offers a rental history, meaning that tenants will now know how much their predecessors paid. For those that live in apartment complexes, the rental history feature means that tenants are also able to benchmark their rent against other apartments in the same building.

For buyers, Domain Home Price Guide provides an estimate of what the property is worth, its potential rental yield, the school catchment zone the property falls within as well as recent sale data for the property, giving any them the opportunity to be as informed as possible.

Potential sellers are able to use their property price estimate as well as research what similar properties nearby have sold for to help inform their price expectations.

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What research is behind the app estimates and how accurate are they?

Home Price Guide is powered by Australian Property Monitors, and the app currently calculates an estimated price based on a range of available data including the most recent sale date for the property and the available data on neighbouring property sales. Its newest feature, Track My Home, means owners can update the details of their property – including recent renovations, extensions and refreshes – to receive an updated property value estimate.

Home Price Guide transparently displays the confidence of each property estimate. Where we cannot confidently provide an estimate based upon key data points, we won’t show one.

How big of an impact do school catchment areas have on properties and has this impact changed over time?

We know that parents often need to factor in what school catchment zone their property falls into, as sometimes living on one side of the street to another can mean the difference between enrolling their children into their preferred school or not. By including school catchment zone information on all Domain listings as well as on Domain Home Price Guide, parents and caregivers can easily identify what school zones a property falls into, without having to waste time calling schools.

This year Domain released the inaugural School Zones Report, which tracked the price growth of properties in school catchment zone areas as opposed to suburbs, as is done traditionally. We found that the year on year growth in highly sought after school zones was sometimes as much as 50 per cent.

Home Price Guide is available by downloading or updating Domain’s iOS app in the Apple App store, or Android app in the Google Play store. It is available on the Domain website at: Domain.com.au/property-profile/.

 

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An estimate of how much your desired property is worth. 

What is equity? How can I use equity in my home loan?

Equity refers to the difference between what your property is worth and how much you owe on it. Essentially, it is the amount you have repaid on your home loan to date, although if your property has gone up in value it can sometimes be a lot more.

You can use the equity in your home loan to finance renovations on your existing property or as a deposit on an investment property. It can also be accessed for other investment opportunities or smaller purchases, such as a car or holiday, using a redraw facility.

Once you are over 65 you can even use the equity in your home loan as a source of income by taking out a reverse mortgage. This will let you access the equity in your loan in the form of regular payments which will be paid back to the bank following your death by selling your property. But like all financial products, it’s best to seek professional advice before you sign on the dotted line.

What is equity and home equity?

The percentage of a property effectively ‘owned’ by the borrower, equity is calculated by subtracting the amount currently owing on a mortgage from the property’s current value. As you pay back your mortgage’s principal, your home equity increases. Equity can be affected by changes in market value or improvements to your property.

What is a line of credit?

A line of credit, also known as a home equity loan, is a type of mortgage that allows you to borrow money using the equity in your property.

Equity is the value of your property, less any outstanding debt against it. For example, if you have a $500,000 property and a $300,000 mortgage against the property, then you have $200,000 equity. This is the portion of the property that you actually own.

This type of loan is a flexible mortgage that allows you to draw on funds when you need them, similar to a credit card.

How much is the first home buyer's grant?

The first home buyer grant amount will vary depending on what state you’re in and the value of the property that you are purchasing. In general, they start around $10,000 but it is advisable to check your eligibility for the grant as well as how much you are entitled to with your state or territory’s revenue office.

What does pre-approval' mean?

Pre-approval for a home loan is an agreement between you and your lender that, subject to certain conditions, you will be able to borrow a set amount when you find the property you want to buy. This approach is useful if you are in the early stages of surveying the property market and need to know how much money you can spend to help guide your search.

It is also useful when you are heading into an auction and want to be able to bid with confidence. Once you have found the property you want to buy you will need to receive formal approval from your bank.

What is an investment loan?

An investment loan is a home loan that is taken out to purchase a property purely for investment purposes. This means that the purchaser will not be living in the property but will instead rent it out or simply retain it for purposes of capital growth.

What is stamp duty?

Stamp duty is the tax that must be paid when purchasing a property in Australia.

It is calculated by the state government based on the selling price of the property. These charges may differ for first homebuyers. You can calculate the stamp duty for your property using our stamp duty calculator.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

What is appreciation or depreciation of property?

The increase or decrease in the value of a property due to factors including inflation, demand and political stability.

What is a loan-to-value ratio (LVR)?

A loan-to-value ratio (otherwise known as a Loan to Valuation Ratio or LVR), is a calculation lenders make to work out the value of your loan versus the value of your property, expressed as a percentage.   Lenders use this calculation to help assess your suitability for a home loan, and whether you need to pay lender’s mortgage insurance (LMI). As a general rule, most banks will require you to pay LMI if your loan-to-value ratio is 80 per cent or more.   LVR is worked out by dividing the loan amount by the value of the property. If you are looking for a quick ball-park estimate of LVR, the size of your deposit is a good indicator as it is directly proportionate to your LVR. For instance, a loan with an LVR of 80 per cent requires a deposit of 20 per cent, while a 90 per cent LVR requires 10 per cent down payment. 

LOAN AMOUNT / PROPERTY VALUE = LVR%

While this all sounds simple enough, it is worth doing a more accurate calculation of LVR before you commit to buying a place as there are some traps to be aware of. Firstly, the ‘loan amount’ is the price you paid for the property plus additional costs such as stamp duty and legal fees, minus your deposit amount. Secondly, the ‘property value’ is determined by your lender’s valuation of the property, not the price you paid for it, and sometimes these can differ so where possible, try and get your bank to evaluate the property before you put in an offer.

How much can I borrow with a guaranteed home loan?

Some lenders will allow you to borrow 100 per cent of the value of the property with a guaranteed home loan. For that to happen, the lender would have to feel confident in your ability to pay off the mortgage and in the security provided by your guarantor.

How do I know if I have to pay LMI?

Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.

If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.