Archive for the ‘Top tips for property & home loans’ Category

Lifestyle Series: Empty Nesters

Posted on Monday February 6th, 2012 by Mortgage Choice
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Posted in Lifestyle series, Top tips for property & home loans | No Comments »

We will be publishing a series of blog posts discussing possible life changing events, how it impacts your finances and most importantly, the biggest commitment you may have – your mortgage. Our posts are contributed by Mortgage Choice brokers covering a number of topics including (in no particular order):

  • Planning for marriage
  • Planning to have children
  • Working overseas/interstate
  • Buying a car
  • Major personal injury
  • Retirement and reverse mortgage
  • Divorce
  • Empty Nesters
  • Loss of employment

We’ll be publishing the above posts on a regular basis so be on the lookout! Feel free to suggest new topics by leaving us a comment.

Celebrating the empty nest

Linda Ireland

Linda Ireland

By Linda Ireland, Mortgage Choice in Buderim

After all these years it’s finally happened – the kids have left home and the house is all yours.  Mortgage Choice broker Linda Ireland looks at the options available for empty nesters to make the most of their home.

It had to happen eventually. The kids have grown up and flown the coup, and your home is probably quieter and tidier than it’s ever been.

For some empty nesters, this new chapter in life can bring a sense of loss. But it also marks an exciting transition from one stage of life to another, and there are plenty of ways to put a much-loved family home to work in preparation for yet another phase of life – retirement.

Many empty nesters are 40 or 50-somethings in their peak earning years. So with the kids gone, chances are there is a lot more cash available. Plenty of people are keen to put this money to work purchasing an investment property, and as an older borrower applying for an investment mortgage, you will need to demonstrate a strong asset position and an exit strategy.

This means being able to demonstrate how you will be able to pay out the mortgage once you retire, without relying on the sale of the property to repay the loan. Some people plan to use their superannuation savings to clear the loan. Others choose a shorter loan term of, say, 15 years.

Putting home equity to work

As a home owner, you may not need to dip into valuable cash reserves to fund an investment property. It may be possible to put existing home equity to work in lieu of a cash deposit.

As a guide, this could mean taking out a loan secured by your home that provides a 20 per cent deposit plus purchase costs on the investment property, with a new loan secured against the rental property, which funds the balance of the purchase price.

Some empty nesters plan to hold onto their existing home and rent it out for the long term while borrowing to fund a new, often smaller home. However, turning your home into an investment property has tax implications. For example, if your home is owned mortgage-free or the balance of the loan is small, the property is likely to be ‘positively geared’, meaning you won’t be receiving the tax benefits associated with negative gearing. Anyone considering this option should seek tailored advice from their accountant and/or financial planner. 

A more common approach is for empty nesters to sell the family home and downsize to a property more appropriate to their new lifestyle. For many empty nesters it has been quite some time since they last applied for a mortgage, and the sheer range of lenders, loans and flexible features available these days can be pleasantly surprising.

The main thing is to think about laying foundations for retirement today. Be sure to get good advice and put plans in place now before time slips away and you find retirement is just around the corner. Your home holds plenty of treasured memories from the past but it can also hold the key to a wonderful future.

Plan your New Year property purchase

Posted on Tuesday January 3rd, 2012 by Mortgage Choice
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Plan your property purchase by speaking to a home loan specialist

Start planning your New Year property purchase

If owing a property is on your checklist for 2012, now’s a good time to start planning. As with any major purchase, the more research and preparation you do, the better chance you have of buying something that’s right for you.

Know your limits
Before setting off to find your dream property, it’s best to get an idea of how much you can afford to borrow and repay – so that you can be realistic in your search and not waste time on properties that could potentially be out of your reach.

There are plenty of online calculators that can help work out your borrowing capacity and repayments. However do keep in mind they provide an estimate only, so be conservative and leave yourself some financial buffers when using these tools. Remember to factor in other expenses as well, such as stamp duties and legal fees which could make a sizable dent in your deposit.

Be thorough when doing the property inspection
Attending open homes can be a hectic and stressful experience. Once you’ve managed to navigate to the six different properties (that all decided to open within the same 2-hour period on a Saturday morning), you then have about 10 minutes to look around before rushing off to your next destination. Amidst the chaos you might have overlooked some flaws or forgotton to check certain features, which could mean a second visit if you’re really keen on the place – provided it doesn’t get sold before that.

This is when it helps to have a property inspection checklist in hand, to make sure you look out for important features and flaws (e.g. smoke alarms, crakes / stains, fans / air conditioning etc); as well as to prompt yourself to ask the agent for some critical information about the property which may not be included in the brochure (e.g. rent and lease expiry date (if applicable), rates, security, insulation etc).

Shop around for the best home loan deal
There are many factors to consider when choosing a home loan. For example your borrowing limit may vary significantly between lenders which could be the difference between getting your dream home or settling for something less; also, some loans may have great interest rates but the features offered by another loan with higher rates might end up saving you more in the long run.

While it’s important to shop around, it’s also critical that you know what to look out for. Consulting a home loan specialist such as a mortgage broker is a stress-free (and cost-free) way to go about this.

Get your home loan pre-approved
A loan pre-approval provides a conditional approval of a loan amount, which can help you shop with confidence when negotiating on a property purchase or bidding at auctions.

Genuine loan pre-approvals follow a similar process to a full loan application whereby borrowers will be assessed on their individual circumstances and needs and are required to verify their identity and ability to repay the loan. Other conditions usually need to be met to move to full finance approval, such as a suitable property valuation.

Keep in mind loan pre-approval is usually a limited time offer, for a period of three to six months.

Here are 5 benefits of a home loan pre-approval:

  1. It prompts you to begin thoroughly exploring your loan options at the beginning of the property purchase process.
  2. Saves time (and lessens possible disappointment) by concentrating the property search in a feasible price range.
  3. Enables real estate/buyers agents to see you as a serious property buyer.
  4. Helps you gain confidence for bidding at auction or negotiating a purchase.
  5. Quickens the settlement process as the loan is already part of the way approved.

Useful links

Tips for keeping your credit file clean

Posted on Wednesday October 5th, 2011 by Mortgage Choice
Posted in Top tips for property & home loans | No Comments »

Tips to keep your creidt file/history clean

Planning to buy a property? Here’s a tip for you – you may be unaware certain aspects of your debt history/credit file including bill defaults and applications for loans and credit cards, are on file and made available to lenders and other credit providers.

The information found on your credit file could hold details that will see your home loan application declined. 

 

 

Here are five tips for keeping your credit file clean: 

  1. Understand where your money is going and pay on time.  Ensure responsible payment of your credit cards, bills and personal loans by contributing funds before the due date. Monitor your accounts closely and look for any discrepancies.
  2. Make it automatic. Missed and late payments are one of the most common defaults on a credit file. Paying bills and minimum repayments before or on time will help prevent unwanted fees. A good way to ensure you don’t miss repayments is to set up auto transfers from your savings account.
  3. Don’t go overboard. It is easy to go over your credit limit, miss paying bills or fall into the habit of thinking “another debt won’t hurt”. You can quickly lose track of spending and fall behind, which is when defaults appear on your credit file. Have a budget and stick to it.
  4. Just say no. Credit providers may tempt you to increase your limit. Resist unless absolutely necessary; don’t increase spending simply because you can. If you are only just getting by you should think about reducing your credit limit until in the clear and perhaps cut up your credit card/s.
  5. Pay more than the minimum.  Paying debts off in full or making repayments above the minimum amount and restricting your spending will help ensure you pay your balance off and do not tarnish your credit file.
Not only are these tips useful in keeping a clean credit file, they’re also good general tips for staying on top of your finances.

Useful links

Tips for attending open house inspections

Posted on Wednesday September 28th, 2011 by Mortgage Choice
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With the Spring selling season upon us, many prospective buyers are busy filling their weekend calendar with open house inspections.

An open house will allow you to see firsthand a property you are interested in buying and it provides a wealth of opportunities to find out more details. This is an important and necessary part of the research you need to perform before committing to the purchase.

While it’s important to get a ‘feel’ of the property and the surrounding area, having a systematic approach to check the tangible and practical aspects of each property can help you make the most of each house inspection, and ultimately a more informed decision. Mortgage Choice offers a comprehensive checklist which you may find handy.

Here are a few things all potential buyers should do:

  • Before you attend an open house inspection, make a list of the things that are important to you, such as the demographics of the area and the property’s aspect, airflow, light, quality of carpets/paint/fittings and state of repair.

  • When you get to the property, you will more than likely be greeted by the real estate agent. Take the time to talk to them; they are experts on real estate in the local area and if they know what you are looking for, they will be able to help (though be aware they are working on the vendor’s behalf, not yours!).

  • Once you are at home, try to go over your checklist logically and without emotion. It’s very easy to get caught up in the thrill of finding something you like and ignoring the negative factors that could lose you money or sleep in the long run.

It’s best to spend as much time as possible viewing each property during an open house inspection because you may only get one or two additional chances to see it before you need to make an offer or head to its auction day.

If after one or more inspections you are considering whether it is the right move for you from an affordability point of view, speak to a professional mortgage broker for help searching through loans that suit your needs. This will help confirm whether or not your financial situation and lifestyle are conducive to purchasing this property.

Useful Links

Lender’s Mortgage Insurance demystified

Posted on Friday September 2nd, 2011 by Mortgage Choice
Posted in First Home Buyers, Home Loans, Mortgage Brokers, Property purchase, Top tips for property & home loans | No Comments »

Taking lender's mortgage insuranceLenders’ Mortgage Insurance is generally charged by your lender if you borrow more than 80% of a property’s value when taking out a home loan.

It insures the lender against any loss incurred if you default on the mortgage and the net proceeds of an enforced sale of the security property are insufficient to clear the debt. It does not cover you, the borrower.

Lender’s Mortgage Insurance is often a necessary evil. In a way, it’s also a help because without it you would be hard pressed to get a home loan with a deposit of less than 20%.

However, it can be anywhere from a few hundred to many thousands of dollars. That’s a large chunk of money! Though you probably won’t have to pay it upfront – most lenders add the cost into the home loan amount.

Wondering whether you should save up a larger deposit or just pay the Lender’s Mortgage Insurance and buy now? It’s a big decision. There are a number of factors to think about, such as what price you put on being able to buy the property now and how much its value may rise between buying it now and waiting until you have a 20% deposit.

The key is to do your research. The sales history of a property and the growth trend of the relevant suburb may give you some indications of future prospects. When it comes to a major purchase like buying a property, you can’t afford not to be diligent. Of course, getting expert advice from specialists such as financial planners and mortgage brokers can also help.

Helpful links:

  • LMI Premium Estimator – Use this Genworth’s LMI estimator to find out an indication of the LMI fee payable.

Mortgage stress and five tips to avoid it

Posted on Friday August 12th, 2011 by Mortgage Choice
Posted in Compare Home Loans, Home Loans, interest rates, Property Market, Top tips for property & home loans | No Comments »

There are borrowers from all walks of life who are wondering how they can ensure they don’t default on their home loan. This is commonly referred to as mortgage stress; a situation in which borrowers are struggling to make loan repayments due to a variety of reasons, such as rising interest rates, high living costs or high level of debt.

To avoid mortgage stress, we recommend planning ahead by reassessing your budget, scheduling automatic home loan repayments, looking at your other debts and creating a savings buffer.

Here are five tips for keeping on track & keeping mortgage stress off your household

1. Redo your budget
You should be reassessing your budget regularly; once a year is nowhere near enough if you have a variable rate home loan. It is always a good idea to revisit your budget every couple of months and any time you think you may need extra spending money, such as during holiday periods. Yesterday’s budget landscape is different to today’s and tomorrow will bring more changes. Do you really know what your expenditure has been, is and will be over the next three months? What costs you can save on and what extra spending will arrive with celebrations and festivities? A budget is there to be followed, so consider all possible activities the short and medium term will bring then cost them in now.

2. Back to the future with loan repayments
It’s sensible to assume rates will fluctuate. Set today’s budget to act on that now by increasing your mortgage repayment amount as if rates were a couple of percentage points higher. If it takes years for rates to move that far then you’ve built up a fantastic financial buffer and provided yourself with peace of mind. If you can make even higher mortgage repayments, that’s great. It also pays to remember while extra funds sit in your home loan account you’re reducing the interest owed and you may be able to access these funds should the need arise.

3. Let your lender do the remembering
Many lenders allow you to set automatic home loan and other debt repayments well into the future so you don’t have to remember to transfer the dollars each time. The funds are simply transferred on the date you select (it’s a good idea to make this your pay day or the day after). The only thing left to action is increasing your repayment amount if you have a variable interest rate that increases.

4. Don’t take on extra debts
Common causes of mortgage stress are higher interest rates and rising living costs. However, overindulgence in debt accumulated after the mortgage is approved is also a big issue.

5. Stick to your limit
It is easy to go over your credit limit, miss paying bills or fall into the habit of thinking “another debt won’t hurt”. You can quickly lose track of spending and fall behind, which is when defaults appear on your credit file. Have a budget and stick to it. Credit providers may also tempt you to increase your limit. Resist unless absolutely necessary; don’t increase spending simply because you can. If you are only just getting by you should think about reducing your limit until in the clear and perhaps cut up your credit card/s.

Helpful links:

Home loan comparison calculator – Compare your current repayments with those of other lenders with lower interest rate; and find out how much you can potentially save.

Pearls of wisdom on mortgage stress – Read some words of wisdom by the world’s greatest investor Warren Buffett on some basic rules of investing & how they can they be applied on your current mortgage situation.

Home loan comparison calculator – Compare your current repayments with those of other lenders with lower interest rate; and find out how much you can potentially save.
Pears of wisdom on mortgage stress – Read some words of wisdom by the world’s greatest investor Warren Buffett on some basic rules of investing & how they can they be applied on your current mortgage situation.

Taking an interest in interest-only loans

Posted on Friday July 15th, 2011 by Mortgage Choice
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Ryan Ewart

By Ryan Ewart, Mortgage Choice servicing the NSW Northern Beaches

Taking an interest in interest-only loans

Interest-only loans are a type of home loan that allows you to repay just the interest on the principal loan amount over the life of the loan. No principal repayments are required during the loan term.

They’re a popular loan of choice among all kinds of borrowers. Why? Repayments are lower than what you would pay on a principal and interest (‘P & I’) loan. You can redirect the extra money you would normally put towards paying off the principal into other areas such as home improvements.

What’s a typical loan term for an interest-only loan?

One to five years is a typical loan term for an interest-only loan. At the end of the interest-only period, you must start making principal and interest repayments.

I generally advise customers to ensure they are prepared for their repayments to rise sharply at the end of the interest-only loan term. Lenders assess your ability to repay the interest-only loan on the basis of it being a principal and interest loan, so the shift to principal and interest should be manageable.

Interest-only: a popular option for investors

Interest-only loans are extremely popular among investors. Investors’ interest payments are tax deductible; they can make minimal loan repayments during the loan term and re-sell the property when it appreciates significantly in value.

The pros and cons of interest-only

There are some potential drawbacks to interest-only loans, particularly for people lacking financial discipline. If you’re satisfied with your principal balance staying the same, by all means pay the minimum interest-only loan amount.

I tend to suggest to customers wanting to reduce the principal balance to set up a direct debit for an extra $200-300 a month to be paid into the home loan. Every dollar you pay over and above the interest only repayment will reduce the principal of the loan, therefore making it principal and interest. The extra repayments can be redrawn as needed and in times of emergency. But again, financial discipline is key to reducing the principal amount.

Helpful links

NT suburbs with highest median prices in 2010

Posted on Tuesday May 24th, 2011 by Mortgage Choice
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In this video we look at suburbs with the highest median prices in 2010, with a focus on Fannie Bay and Bayview in the Northern Territory.

houses in Fannie Bay recorded the capital’s highest median price in 2010 of $930,000
houses in Bayview recorded the capital’s second highest median price in 2010 of $837,500
  • houses in Fannie Bay recorded the capital’s highest median price in 2010 of $930,000
  • houses in Bayview recorded the capital’s second highest median price in 2010 of $837,500

Plus coverage of:

  • An interview with Jim McKerlie, Chairman of Onthehouse about his vision for the property website, and what it will do for the real estate sector.
  • Tax tip from Depreciator – the Tax Depreciation Schedule specialists

Useful Links:

Home energy efficiency moves that matter

Posted on Wednesday May 18th, 2011 by Mortgage Choice
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Living RoomWhen you’re looking to buy property, location, proximity to amenities, public transport and even architectural style are often high on many buyers’ shopping lists.

A home’s energy efficiency rating, or EER, may not be as high on the wish list today. But with electricity prices soaring, a home’s thermal performance – that is, the amount of heating and cooling the dwelling will require to maintain thermal comfort throughout the year – could become a bigger priority for buyers and sellers alike.

Danielle King from Green Moves says she has no doubts that investing in improving the energy performance of your property will reap financial rewards in the near future.

“Owning a home is a long-term investment. Making it more energy efficient is also a medium-term investment, but it’s one that can truly pay dividends. With electricity costs set to rise significantly, taking energy efficiency measures is about safeguarding against these impacts as well as reducing your impact on the environment and reducing your greenhouse emissions.”

“Taking steps to improve the energy efficiency of your home has the capacity to increase the value of your home and make it more attractive to prospective buyers.”

Energy efficiency ratings and new homes
The Building Council of Australia (BCA) introduced minimum star rating requirements for new homes across all Australian states and territories in 2003. New homes have a star rating which is an assessment of the building’s thermal performance.

Factors that affect a home’s energy efficiency rating
Many factors can affect a home’s EER, such as:

  • a home’s layout
  • the construction of the roof, walls, windows and floors
  • the orientation of the building on the site. The orientation particularly relates to where windows are placed, shading in relation to the sun and local breezes and generally how well the home suits the local climate.

Homes are rated on a scale of 0 to 10 stars, with 10 being the most energy efficient. The higher the rating the less cooling and heated is needed to keep the home comfortable.

Energy efficiency ratings and existing homes
In April 2009, the Council of Australian Governments (COAG) agreed, subject to regulatory impact assessment requirements, to introduce a mandatory disclosure scheme across Australia to provide information about the energy, greenhouse and water performance of existing homes at point of sale or lease.

The scheme will require homeowners that sell or rent houses, flats and apartments to provide information to prospective buyers and renters about the energy, water and greenhouse performance of the home following a standard approach.

However, industry pundits suggest that getting all states and territories to agree on a national scheme by 2011 is looking highly unlikely.

What’s happening in the ACT
In the ACT, it is already compulsory for real estate agents to include the mandatory disclosure rating in advertising materials for sale of a house.

The existing energy efficiency rating (EER) in the ACT only takes into account the thermal performance of the building structure and excludes installed heating and cooling, hot water systems and lighting.

When a nationwide mandatory disclosure scheme is introduced, it’s anticipated that these additional elements will be included.

Queensland introduces Sustainability Declaration
Since January, anyone who markets or offers a house, townhouse or unit for sale in Queensland must complete what’s called a ‘Sustainability Declaration’. It’s a mandatory checklist that the homeowner must complete before selling.

How do I get my home’s energy efficiency rating calculated?
Homeowners should obtain an assessment/review to identify the best options for their home. The Association of Building Sustainability Assessors (ABSA) is a good place to start.

Did you know
A report commissioned by the Australian Bureau of Statistics (ABS) that investigated the effect that energy efficiency ratings had on ACT house prices found that if the energy performance of a house improves by 1 star level, on average its market value will increase by around 3-5%.

Have you taken measures to make your home more energy efficient? Please share your experience with us by leaving a comment below.

Useful Links

What is pre-approval

Posted on Tuesday April 19th, 2011 by Mortgage Choice
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Posted in Home Loans, Top tips for property & home loans | No Comments »
David Coates

David Coates

By David Coates, Mortgage Choice in Brighton, Victoria

The particulars of pre-approval

Home buyers seeking to get a clearer picture of how much they can borrow can benefit from getting a home loan pre-approval.

Pre-approval is a lender’s written assessment of your creditworthiness for a loan. The assessment includes your ‘ability to repay’ a loan, based on your income; living expenses; and repayments for existing loans, plus an assessment of your ‘willingness to repay’ a loan, based on a number of factors such as your credit history, the stability of your employment and the number of times you change residential address.

Why pre-approval is helpful

Pre-approval brings peace of mind during the home hunting process, knowing that finance is on hand when you’ve found the home you’re ready to buy. Usually valid for 3 months, pre-approval can be renewed if finding a property is taking a while.

Not all pre-approvals are created equal

Pre-approval is not a guarantee of finance. Some pre-approvals – particularly those done in a few minutes, online, or by phone – won’t properly test your ‘ability to repay’ or your ‘willingness to repay’.

Talk to your local Mortgage Choice mortgage broker about arranging pre-approval for a loan that meets your budget and financial requirements.

Helpful link

Have you applied for a pre-approval before? Did it offer you some peace of mind during your house-hunting journey?

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