How To Buy Without 20% Deposit?

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When you consider that a small flat in Sydney could set you back half a million dollars at the moment, saving a 20% deposit to buy that flat – $100,000 – can seem an insurmountable task. That’s where insurance can help.

Lenders mortgage insurance (LMI) may be an added expense, but it offers buyers the opportunity to dive into the property market earlier, without saving up an entire 20 per cent of the property’s purchase price as a deposit.

 

 What is it?

LMI protects the bank or lender, should a home loan go into default, guaranteeing that the lender will get its money back if the property needs to be sold and there is a shortfall in repaying the loan.

While a 20% deposit generally provides a good buffer against any drops in property value over the life of a loan, LMI can also provide the same protection, meaning borrowers can purchase property with a smaller deposit.

 

What’s in it for you?

For the borrower, it may seem LMI it is just another expense to cover. But insurance can mean that some buyers will be able to enter the property market with, for example, only a five per cent deposit saved. In the example above, a $500,000 property, this brings the deposit down from $100,000 to just $25,000.

 

And, if the market is hot and prices are rising rapidly, paying LMI so that you can buy now could be cheaper than taking the time to save a bigger deposit. In the time it takes to save a higher deposit amount, property prices may well have surged by more than cost of the insurance so, for some properties and purchasers, it can make good financial sense to purchase earlier even with the added cost of LMI, especially when you consider the rent that you would pay while you’re saving.

 

What you need to know

The insurance premium is generally a one-off payment, but you may be able to roll it into the loan amount so that you are paying for it month-by-month along with your mortgage.

There can be a big difference between premiums paid if you have, for example, a 10 per cent deposit saved compared with a five per cent deposit, so it may well be worth trying to gather together some extra funds, even if you despair of reaching the full 20 per cent.

An MFAA-accredited finance broker is an expert on the industry and the credit market. Investigating your options and working out whether to buy now or save extra deposit is a decision that a good finance broker can help you with. Find an MFAA-accredit finance broker here, and look for the ‘MFAA accredited’ sign on your finance broker’s door.

 

TRUSTED MORTGAGE BROKER

REAL ESTATE KENWICK

RELIABLE CLEANING AGENT

 

How To Avoid Loan Default

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Late payments and loan defaults leave marks on a credit history that can complicate any effort to refinance or secure a loan in the future. Default can also lead to a home being repossessed and sold by the lender, so it’s very important to act quickly to avoid it.

While late bill payments and a loan in arrears can impact your credit report and lead to difficulty securing finance in the future, the worst case scenario is repossession of a property.

In the past, lenders may have taken months to start the proceedings that lead to repossession. However, according to the Financial Rights Legal Centre (FRLC), this is not the case anymore.

“Lenders work to a timetable to begin court proceedings and this can be very difficult to stop once this process has started,” the FRLC explains in its Mortgage Stress Fact Sheet.

Once a mortgagee has defaulted on a loan by failing to make repayments as agreed, they can be sent a Default Notice, which gives them 30 days to catch up on the repayments that are in arrears, as well as continuing to make any repayments that are due in the 30-day period.

“This notice will include an acceleration clause,” the FRLC explains. “This means that if the arrears are still outstanding after the 30 days has lapsed, the entire loan becomes payable.”

Thirty days after the Default Notice, the lender can take vacant possession of a property that is not occupied, or seek a court order for possession of a property that is occupied.

The key to avoiding this substantial trouble is, of course, to keep making repayments. From time to time, circumstances such as unexpected job loss or illness will impact a mortgagee’s ability to make payments and, when this happens, the key is to act quickly, as there are more options before a Default Notice is served than there are after.

“Don’t be scared,” advises the FRLC. “Lenders make repayment arrangements all the time.”

Many lenders will negotiate short-term variations to repayment schedules as long as there is a plan to get back on track, and there are circumstances in which lenders are obligated to agree to such arrangements. It is important, however, not to agree to payment terms that cannot be met.

“Make sure you think through your plan as to when you will resume making payments. Do not promise something you are not certain you can achieve or is not realistic,” warns the FRLC. “If you don’t know when things will improve, ask for an initial arrangement to be reviewed at the end of the agreed repayment arrangement.”

One of the advantages of recognising a looming problem before you get behind in repayments is that a finance broker may be able to assist you to pinpoint the source of the problem, as well as identify savings that may be available by refinancing to a lower-rate or lower-fee loan. Once there are clear signs of financial distress, this will become much more difficult.

If you are struggling to make your mortgage repayments, an MFAA Accredited Finance Broker may be able to help you negotiate with your lender or find a more manageable loan.

 

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Taking Control Of Your Finance

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Consumers will likely face more expensive loans and more time wasted at banks if the royal commission’s proposed mortgage broker rules go ahead, a top lending expert has warned.

In a landmark report, commissioner Kenneth Hayne found shocking evidence of greed and misconduct in the Australian financial sector at the expense of consumers and businesses.

The former High Court Justice called for widespread change in how mortgage brokers operate, arguing brokers should receive an upfront free from customers, rather than earning upfront commissions from banks, and ‘money for nothing’ trail commissions that they keep receiving for the duration of a mortgage.

On face value, the proposed changes sound like welcome news for consumers, but CoreData head of lending Simon Elwig has predicted unintended consequences that could leave consumers poorer and make the Big Four major banks winners. Mr Elwig said the proposed rules would hit the mortgage broker industry hard. He argued the changes would lead to fewer loans being offered by smaller lenders, leading to a less competitive home loan industry and more expensive loans for customers.  The biggest blow to mortgage brokers would be getting rid of trail commissions, he said. Trail commissions are ongoing payments banks make to brokers over the life of a loan.

In his report, Mr Hayne argued the commissions were like ‘money for nothing’ for brokers.

‘Why should a broker, whose work is complete when the loan is arranged, continue to benefit from the loan for years to come?’ he wrote.

‘It cannot be that they are deferred payment of fees earned earlier when the amount paid as trail depends upon the length of the life of the loan.

‘And it cannot be that they are a fee for providing continuing services given there is no obligation for the broker to do so and no evidence of it being done.’

Mr Elwig told Daily Mail Australia the rules could drive many mortgage brokers out of the industry.

The fees make up about 40 to 45 per cent of their income, he claimed, and brokers settle 59 per cent of mortgages in Australia.

‘That would mean that you’d get a reduction in mortgage brokers, because if your income drops that much, people say, “alright, I’m getting out”,’ Mr Elwig said.

Brokers will say ‘alright, I’m getting out’ … Major banks won’t need to discount as much

‘What that means is you would get less volume to the non-major (lenders).’

Mr Elwig said over the past five years, mortgage brokers have increasingly channeled customers to smaller lenders, creating a more competitive market.

The amount of loans brokered with the major banks by major lender AFG has dropped from 73.6 per cent in 2013 to 57.8 per cent last year, he said.

But the changes would bring the drift to smaller lenders to an end, he argued: ‘Now that will stop, that will reverse.

‘Reduced competition would affect the discounted rates currently being offered by the Big Four banks, meaning more expensive loans for consumers,’ he said.

‘The majors, at the moment (their) rates are very competitive, meaning big discounting is going on,’ Mr Elwig said.

‘The impact will be that if the mortgage brokers reduce in the market, the major banks will not need to discount as much to get their loans.

‘If they’re not discounted loans, at the end of the day the consumer is paying a higher rate than they might otherwise have done.’

And Mr Elwig said there’s another big consequence for consumers.

If there are fewer brokers, customers will likely have to spend more time shopping around for a loan.

‘What it will also mean is if there’s less brokers, a customer would have to go to more than one place.

‘They’d have to go to different banks so therefore the way things are going it’s more difficult to get a loan.

‘So a consumer, rather than go to a broker, might have to go to Westpac and get declined and then go somewhere else and have to do more work themselves.’

Mr Elwig said he did not think customers would come under greater scrutiny for their spending prior to getting a loan, because that is already happening.

There have been widespread reports of borrowers having to divulge their smallest household costs, like Netflix subscriptions and gym memberships, while applying for loans.

‘That’s already happening, that impact has already happened. It’s going to be more of the same,’ he said.

Ratings agency Moody’s Investor Service backed Mr Elwig’s argument in a statement on Monday, warning the new borrower-pays system would affect competition.

‘We expect this change will consolidate the market position and pricing power of the four major banks,’ Moody’s said.

And the Federal government has sounded a note of caution about the mortgage broker rules.

Treasurer Josh Frydenberg said moving to a customer-pays model would benefit the big banks.

‘In effect you would be putting the mortgage brokers out of business and giving that business to the big banks.

‘We don’t want to give the big banks a free kick.’

The government has not publicly supported the recommendation to phase out upfront commissions. It has, however, said it will ‘take action’ on all 76 of the commission’s recommendations.

A blow to farmers as well?

The royal commission has called for measures to make it easier for farmers to handle debts owed to banks while land is affected by drought or natural disaster.

The commission called on the banks to amend their code so they don’t charge default interest on agricultural land loans during times of drought or natural disasters.

The commission recommended banks only call in receivers or administrators for a distressed loan as a last resort. And it advocated for a national scheme of farm debt mediation.

But Mr Elwig warned of possible unintended consequences from the new rules in that banks could become more cautious about doing business with farmers.

‘They (the commission) is trying to protect the farmers. It might have an unintended consequence.

‘Banks are also, when they try and do commercial deals, they’re always risk averse.

‘So it might have the opposite effect’.

WHAT ARE TRAIL COMMISSIONS?

Trail commissions are ongoing payments banks make to brokers over the life of a loan. Brokers received a bigger commission for bigger loans.

In his report Royal Commissioner Kenneth Hayne slammed the commissions as, ‘to put it bluntly … money for nothing’.

Mortgage brokers are ‘extremely disappointed’ trail commissions have been singled out by the commission.

Peter White, CEO of the Finance Brokers Association, was quoted telling the Australian Financial Review that they are really a ‘deferred upfront fee.

‘The impact will be upfront commissions and interest rates going up,’ Mr White said.

In his report, Mr Hayne wrote of the commissions: ‘Why should a broker, whose work is complete when the loan is arranged, continue to benefit from the loan for years to come?’

In this turbulent economy climate, to find money to invest for your future, you need to make sure that your outgoing expenses are less than the income that you are receiving. You need to develop an excess that you can have free to invest.

Now before you start to think….”well I don’t have any excess left…if I was earning more money….then I would have some free”. Let me dispel this myth…and tell you that it is a known and excepted fact that the amount of money that people earn has little if any bearing on whether or not they have an excess left to invest. The only way to create an excess it to spend less than you earn, instead of spending all that you earn.

Even doctors and lawyers, who earn well over $100,000.00 per year, often end up at retirement with little more Net Worth than factory or office workers.

Net Worth is calculated by deducting the value of all the liabilities or loans you have from the income-producing assets owned to give you the net value of your income-producing assets.

Why aren’t high-income earners retiring wealthy? Why don’t they end up with a greater Net Worth than someone on a low income? It is quite simple. Human nature seems to dictate that whatever anyone earns….they spend….some even spend more than they earn and charge it on their credit card.

The higher your income grows…the more you spend and the only way to get out of this cycle is to realise that it is happening, and make a concerted effort to reverse this habit….and to begin reducing your expenditures so that you can free up money to invest.

The best way to do this, is to try the 10/90 plan. This plan simply means that as soon as you receive your pay….you put aside 10% of it for investment….and then use the other 90% to live off of. Put aside the 10%, and then pay all the bills and do the grocery shopping….and then after that whatever is left over you can spend.

Most people do it the wrong way around…they pay the bills, do the shopping and spend what is left over, never leaving any left to save or invest. By taking the investment money out first you will alleviate the temptation to spend it.

The road to wealth is not determined by how much you earn, but by how you utilise the income you have and how much you save and invest.

You need to take control of your finances. One of the best ways to start having more control over your money is to find out where it has all been going, and then amend your spending habits to allow you to live within the 10/90 plan.

If you write down a list of your monthly net income, then in another column write down a list of the essential items that you have to spend money on. You should be able to work out an average for telephone, gas, electricity, insurances and rates, from your previous bills. Work out an average of how much is spent on grocery shopping and petrol. If there are any other necessary utilities include them as well. Then deduct the second column from the first – and this will give you the maximum potential savings for each month.

It can be quite startling how high this figure can be and make you wonder where all the extra money went.

Another good learning experience is to simply write down for a fortnight every dollar spent and write next to it what it was for. You will soon find that there are a lot of unnecessary expenses, often caused by impulse buying, where you have spent money on items that you neither needed or really wanted, and could easily have gone without.

When you can begin to recognise these areas, and start to consider whether or not you are spending your money wisely, before you hand it over, then you will be beginning to take control over your money and are well on the way to embarking on your investment journey, which will enable you to have a financially secure future for you and your children.

There are many worthy ways to spend your time and energy. Our society is in desperate need of people who will care about people and things other than themselves. There are many ways that adults can help leave a positive legacy for the generations behind them. One of the best ways that we as adults can care for the world we live in is to invest in the young people all around us.

Some of you are probably thinking that you are parents and that isn’t that enough of a contribution to make to the next generation? Being a parent is one of the most obvious and perhaps best ways to invest in children, but it is not the only way. All adults, parents or not, have the ability and the responsibility to make life better for children and young people. I believe we have this incredible job to do, that we have the task of spending our lives on things that make life better for others.

Taking time to invest in others requires just that time. You cannot get very far in any relationship without putting time into it. If you are parent, take the time to parent well. Take time to get into the lives and hearts and minds of your kids. Learn about the things they care about, listen to the things they are scared of or excited about. Take your kids to their favourite park or read a great book with them before bed each night. Time is one of the best ways you can invest into children. If you are not a parent, find ways to interact with children. Offer to take the kids of your friends or neighbour for an evening. Take time to play games, go for walks, eat dessert or read books with kids. Invest yourself into the future of our country.

Learning to invest in young people requires that you offer yourself. By offering yourself I mean you allow children to learn from your life. Share stories from your past, lessons you’ve learned, and things you’ve failed at. Young people love to learn how adults have done life. Invest into them by being open and honest about the way you’ve lived, the decisions you’ve made and the things you would do differently if you could start again. You might be amazed at how much kids respond to adults that are offering themselves.

Few things are as valuable as taking time and energy to invest into children and young people. Think about ways that you could share what you’ve learned about life with others.

LOCAL MORTGAGE BROKER

KENWICH REAL ESTATE AGENT

 

First Home Buyer Advice I Wish Someone Had Told Me

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Purchasing a property is often the single largest investment a person or family will make, but it can be a bewildering experience if you don’t really know what’s going on.

Having just bought my first home, I was left wishing I could find a course on “how to buy a house”, instead of having to learn by experience and blunder through with little understanding.

Some things might seem self explanatory or obvious to people who already own property, but I found there was a lot of contradictory information out there.

Here are some things I wish I knew before I started looking to buy a home.

You don’t necessarily need a 20 per cent deposit
The 20 per cent deposit is ideal.

The prospect of saving a large deposit — say $100,000 for a $500,000 property — can be daunting but lenders do provide mortgages to buyers who have saved less than one-fifth of the purchase price.

But you will have to pay for it.

Buyers with less than 20 per cent of the purchase price will often be required to pay lenders mortgage insurance (LMI) which protects the credit provider in the case the borrower cannot pay.

It can be added to your loan, but the lender can also charge you a higher interest rate.

What the expert says: Laura Higgins, senior executive leader with ASIC’s Moneysmart, said while it was not essential, the 20 per cent deposit was “absolutely preferred”.

“If you have a 20 per cent deposit that could set you up for repayments that suit you better, afford more options around the kind of mortgage you could access and is absolutely the best option,” she said.

“That doesn’t mean it’s an option for everyone; there are other ways to get entry into the housing market and make arrangements for your finances.

“I think it’s a good thing to aim for, but it is inspirational for some people, I appreciate that.”

Banks will lend you a scary amount of money. Having visited a mortgage broker early in the research phase, it became apparent some institutions would have loaned double what my partner and I could afford to repay.

The broker entered our earnings, expenses and a modest deposit amount in a program, which returned the different amounts institutions were willing to lend us.

Some were offering to lend us well over $1 million, with repayments that would have been unachievable.

It could be easy to fall into a trap where you borrow too much to buy a dream home, and then struggle to make the repayments.

What the expert says: Ms Higgins said first home buyers should fully understand their budget, and what they can afford in order to maintain the lifestyle they want.

“I think it’s probably really being honest about what you can afford because of that emotional attachment that can often come along with falling in love with a house,” she said.

“And really understanding that if you don’t want to compromise your lifestyle, or there is a certain life you want to lead, you don’t want a mortgage to be the thing that makes you unhappy.

“It’s about being realistic about what you can afford, what that looks like day-to-day with the way you live and preparing for a change.

“Interest rates go down but they also go up, so being really prepared.”

Buying a house is not just a matter of saving up a deposit and then purchasing a house.

There are a range of other costs including stamp duty, transfer fees, government fees, charges for building and pest reports, LMI and conveyancing and solicitor’s fees that can add up to thousands of dollars.

These all chip into the deposit you have saved and reduce the amount you actually can put into the purchase.

What the expert says: Ms Higgins said it was important to fully research what costs were associated with purchasing a house and ensure there were no surprises when it came time to sign on the dotted line.

“Often if you’re buying that house with someone else make sure you do that together or with friends, or speaking with family members about their experience as often that will trigger a really interesting conversation about stamp duty or how they managed those surprise expenses if they were a surprise to them,” she said.

Pre-approval is no guarantee of getting a loan
Many lenders offer a pre-approval service where they will weigh up your income, expenditure and amount of personal debt against your deposit to see if you qualify for a loan.

It gives you confidence to go ahead and make offers on properties within your budget, but it is no silver bullet.

The full loan approval only comes after the lender receives a signed contract, where they investigate and see if the property is a worthwhile investment.

What the expert says: Ms Higgins said pre-approval was good for gaining a realistic understanding of your budget.

“It’s really important at the beginning of the process so you know you’re looking at places you can afford, rather than falling in love with places and then trying to reverse engineer it to get the funding,” she said.

You need to take out insurance the day you sign the contract
After agreeing to a price with the seller, there is still a settlement period before the buyer can actually move in.

Even though it may be 30 days before you pick up the keys, you need to take out insurance on the property in the interim to protect against any damages.

The legal liability for damages varies between the states and territories, but some lenders will insist that buyers cover themselves before settlement.

It is probably wise to take the advice of your solicitor or conveyancer to learn of your position.

What the expert says: Ms Higgins said it was a good idea to protect your new big purchase.

“You need insurance when you sign up to that house, before you move in your things. You don’t want to lose that investment or be vulnerable,” she said.
Some agents prefer to sell houses via auction, but it can be a trap if you are unsure of your finances or have doubts about the building and pest reports.

In a standard conditional offer you can add a backstop, where if your finance does not get approved or the building has any issues you can pull out.

But you do not have that luxury with an auction, meaning if the reserve price is met and you win, you will have no option but to buy the property.

What the expert says: Auctions can be a trap for those who do not fully understand what they’re looking for, Ms Higgins said.

“Do your research, go to a couple of auctions and make sure the first auction you go to is not the one you’re participating in,” she said.

“It’s a lot of work to get ready to buy a house and it isn’t just about spending Saturday mornings wandering through the neighbourhood.

“It is a bit of practice as well so you can feel confident when you got to an auction you understand the conditions and what you’re signing up for and you’re prepared.”

The process can feel like a game with changing rules
Buyers and agents seem to be locked in a game of distrust where everyone is holding their cards close to their chest.

I naively thought honesty would be the best approach and was happy to discuss my budget and how much I was looking to spend.

When making an offer, I was at times told I was “in the ballpark”, only to find out the owner was looking for $50,000 more than I could pay.

Seemingly simple questions like “how much does the owner want?” were met with riddle-like responses like “the market decides the price” or “the owner has decided to go to market without a price as buyers have more information than ever and have a better handle of the value”.

While I was being honest, it took me a while to understand the agents probably believed I was not being fully truthful about my budget with them.

There appears to be little choice but to play the game, trying to slowly feel out the middle ground.

It’s also important to remember the agent works for the seller, not for you.

They will use sales tactics to try to eke out more from you to get more for the owner, and ultimately for themselves in commission.

What the expert says: Ms Higgins said buyers needed to make use of the vast volume of information online to gauge prices, and sift through all the mixed messages.

“I think we can understand the shape of the neighbourhood so much more easily, so again it’s about doing your research,” she said.

“If you’re interested in a house you can get to know that real estate agent’s properties, what they’ve told people and then what they sell for, and how closely they are aligned, or how far off they are.

“It is a lot of work, and it can be a really great fun project, but it does take time and lots of research.

“Ask lots of questions and really invest in the process.”

When it comes to owning property many people around the world will tell you that this is a lifelong dream. While once an opportunity that seemed to be reserved for either the wealthiest or the most miserly among the general population home ownership is now something that is accessible to a larger segment of the population than ever before.

This is good news for many but for some can lead to confusing encounters with mortgage brokers and serious sharks along the way. The best advice that anyone can give someone attempting to embrace the dream of real estate ownership is to deal with a reputable company when it comes to obtaining a mortgage. Even when dealing with reputable lending companies you must watch out for those who do not have your best interest at heart.

If you would like some very practical advice when it comes to getting a mortgage, then you are at the right place. First of all, avoid lenders that are encouraging you to take a loan for more money than you are comfortable repaying. Foreclosures are at a record high when it comes to the mortgage industry at the moment because of predatory lending practice on behalf of some mortgage brokers. These practices include convincing people to borrow more money than they could realistically hope to pay over time and have any quality of life as well as convincing homebuyers to take out adjustable rate mortgages in the beginning in order to procure lower rates.

Shop around before you decide to buy when it comes to mortgages. This doesn’t mean to actually apply for mortgages all over town but do the research and compare rates before applying with any one company. Talk to several different brokers and find out what they have to offer you that the other company down the road cannot or will not offer. Keep in mind that mortgage companies will offer everything under the sun from free toasters to free vacations in order to get you to go with their company. The proof is in the terms however. It is simply not worth that free toaster if you are going to end up paying a 6.9% interest rate instead of a 5.9% rate. You will have paid for that toaster many times over in the process of paying the mortgage.

Even after you’ve applied for a mortgage, if the deal seems to be going south check out your other options. There are all kinds of problems that crop up along the way. You are not marrying the mortgage broker. Nine times out of ten you aren’t even making any sort of commitment at all to your mortgage broker. You will however be living in the house you select. If there is a problem with the mortgage company for the specific home you want do not hesitate to change in order to get the home you desire for your family rather than allowing the mortgage company to dictate what kind of home you can buy.

I mention this because we had a very similar problem when we purchased our turn of the century home. The mortgage company didn’t think the home was worth the risk because of its age. We saw the beauty and the potential in our home that is coming along quite nicely and managed to be approved and financed in short order with another mortgage company. If this was the case in our situation, chances are that it will work for others as well.

In all honesty, it is nearly impossible to buy a home in this day and age without taking out a mortgage. It is best however if you see the process as a learning experience rather than an abject lesson in intimidation. This is your home and your money that will be spent in order to purchase the home. You are asking them for a loan but quite frankly, they need your business. Do not hesitate to shop around for the best deal with a mortgage just as you did when finding your home.

 

PROFESSIONAL MORTGAGE BROKER KENWICK

TRUSTED LOCAL REAL ESTATE AGENT

Aussie Homeowners Trapped In ‘Mortgage Prison’

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Australia’s weaker-than-expected economic performance during the third quarter of 2018 has triggered many rate-cut predictions — however, one expert said that many economists and market watchers are just crying wolf.

In an analysis on Realestate.com.au, economist Nerida Conisbee said there was not enough justification for the Reserve Bank of Australia (RBA) to cut the official cash rate, even with the 1.9% inflation rate due to Australia’s lacklustre economic growth.

“The inflation rate’s fall below 2% is one of the reasons some commentators have speculated that the RBA may soon cut the interest rate. But when the inflation rate drops below 2%, it isn’t an automatic response from the RBA to cut the rate; they also look at the outlook as to where inflation will head without their intervention,” she said.

Despite the muted GDP result and restrained consumer sentiment, unemployment rate remains low. The current market situation will be unlikely to influence the RBA in making its monetary policy decision, Conisbee said.

However, Conisbee believes that a continued uptick in short-term money market interest rates will hugely affect the RBA’s decision.

Australian banks currently face expensive access to overseas funds, affecting their home-loan profit margins. Around 20% of the big four banks’ money is sourced from short-term money markets. To counter the effects of high funding costs, banks are starting to increase their mortgage rates.

This, in turn, could dampen consumer spending and affect the RBA’s inflation target.

AMP Capital chief economist Shane Oliver told Realestate.com.au that this scenario would likely compel the central bank to cut rates.

“The Reserve Bank might say, ‘Well, we don’t want mortgage rates to go up, because that will affect the economy, therefore we will cut the cash rate with the aim of bringing down the debt rate and offsetting the increase in funding cost that the banks have experienced,’” he said.

But the main threat seems to be the negative wealth effect brought about by the housing downturn. Oliver said when house prices fall, people tend to spend less because of their perception that their wealth has declined.

“And that leads to weaker consumer spending, which has the impact of keeping price inflation lower for longer. [Conversely], when property prices were rising in the past, people were happy to spend more and save less, despite lower wages,” he said.

Whether or not to re-finance is a question homeowner may ask themselves many times while they are living in their home. Re-financing is essentially taking out one home loan to repay an existing home loan. This may sound odd at first but it is important to realise when this is done properly it can result in a significant cost savings for the homeowner over the course of the loan. When there is the potential for an overall savings it might be time to consider re-financing. There are certain situations which make re-financing worthwhile. These situations may include when the credit scores of the homeowners improve, when the financial situation of the homeowners improves and when national interest rates drop. This article will examine each of these scenarios and discuss why they may warrant a re-finance.

When Credit Scores Improve

There are currently so many home loan options available, that even those with poor credit are likely to find a lender who can assist them in realising their dream of purchasing a home. However, those with poor credit are likely to be offered unfavourable loan terms such as high interest rates or variable interest rates instead of fixed rates. This is because the lender considers these homeowners to be higher risk than others because of their poor credit.

Fortunately for those with poor credit, many credit mistakes can be repaired over time. Some financial blemishes such as bankruptcies simply disappear after a number of years while other blemishes such as frequent late payments can be minimised by maintaining a more favourable record of repaying debts and demonstrating an ability to repay existing debts.

When a homeowner’s credit score improves considerable, the homeowner should inquire about the possibility of re-financing their current mortgage. All citizens are entitled to a free annual credit report from each of the three major credit reporting bureaus. Homeowners should take advantage of these three reports to check their credit each year and determine whether or not their credit has increased significantly. When they notice a significant increase, they should consider contacting lenders to determine the rates and terms they may be willing to offer.

When Financial Situations Change

A change in the homeowner’s financial situation can also warrant investigation into the process of re-financing. A homeowner may find himself making considerably more money due to a change in jobs or considerably less money due to a lay off or a change in careers. In either case the homeowner should investigate the possibility of re-financing. The homeowner may find an increase in pay may allow them to obtain a lower interest rate.

Alternately a homeowner who loses their job or takes a pay cut as a result of a change in careers may hope to refinance and consolidate their debt. This may result in the homeowner paying more because some debts are drawn out over a longer period of time but it can result in a lower monthly payment for the homeowner which may be advantageous at this juncture of his life.

When Interest Rates Drop

Interest rates dropping is the one signal that sends many homeowners rushing to their lenders to discuss the possibility of re-financing their home. Lower interest rates are certainly appealing because they can result in an overall savings over the course of the loan but homeowners should also realize that every time the interest rates drop, a re-finance of the home is not warranted. The caveat to re-financing to take advantage of lower interest rates is that the homeowner should carefully evaluate the situation to ensure the closing costs associated with re-financing do not exceed the overall savings benefit gained from obtaining a lower interest rate. This is significant because if the cost of re-financing is higher than the savings in interest, the homeowner does not benefit from re-financing and may actually lose money in the process.

The mathematics associated with determining whether or not there is an actual savings is not overly complicated but there is the possibility that the homeowner will make mistakes in these types of calculations. Fortunately there are a number of calculators available on the Internet which can help homeowners to determine whether or not re-financing is worthwhile.

Unfortunately, thousands of Australians are stuck in a “mortgage prison” with new lending criteria leaving them unable to refinance their loans to get a better rate.

Changes in bank rules around living expenses calculations have effectively wiped huge amounts off the maximum a bank will allow you to borrow.

Many people are now finding they originally borrowed more than a bank would lend them under current conditions, meaning they haven’t got the option of shopping around to get a better interest rate — no bank will lend them the amount they need.

Lending criteria has been tightened in the past year. The ongoing Financial Services Royal Commission is likely to tighten the criteria even further — meaning people will be able to borrow even less than they once did.

With homeowners unable to shop around, they can be stuck paying a high interest rate, which will leave them potentially paying tens of thousands, even hundreds of thousands more over the life of a loan.

Recently the Bank of Queensland and Auswide Bank announced they will raise variable mortgage rates as their borrowing costs grow. This follows a warning last month from Credit Suisse that out-of-cycle rate rises were on the table.

Precise numbers of Australia’s mortgage prisoners are hard to come by, but Mozo investment and lending expert Steve Jovcevski told news.com.au that he expected most of them are those who have borrowed and bought in the last five years.

He said the changes in how mortgage eligibility are calculated have made a huge difference for many recent borrowers, particularly as banks start to raise rates.

Before lending criteria was changed, a flat rate for living expenses was applied, resulting in many hopeful homebuyers borrowing much more than they now could.

Mr Jovcevski gave an example of a couple earning $120,000 between them, who bought a home in 2013, borrowing a total of $800,000 at 5% per annum, and who would be paying $4295 a month on their loan, leaving $3680 for monthly expenses.

Even with a pay raise between them bringing their income up to $129,000 the couple now faces a change in rules around living expenses that raises the bar for any borrower.

Previously banks estimated these expenses, with a buffer of 1.5 per cent to safeguard against rate rises. Now they are looking closer at people’s monthly expenditure, and have increased the buffer to 2 per cent.

Under this new criteria, the couple would only be able to borrow $680,000, even though their income hasn’t changed.

And because their mortgage is still more than $680,000, they won’t be able to find another bank to make up the difference — meaning they’re stuck with their original loan paying a high interest rate.

The difference between a 5 per cent home loan and a 3.8 per cent home loan amounts to $149,272 over the life of the loan.

“When a customer is essentially tied to a provider, they are at the mercy of whatever rate rise or conditions the bank chooses to impose. Given the current situation, banks have the power to hold some of their customers prisoners,” Mr Jovcevski said.

“The sad reality is borrowers who need competitive mortgage rates to stay financially afloat are most likely to be mortgage prisoners.”

First Home Buyers Australia director Taj Singh said he was very much aware of the crackdown on borrowing limits and living expenses for borrowers.

The mortgage broker said this was putting many borrowers in a position where they can no longer refinance to get a better rate.

He said given many loans were refinanced every four to six years, this issue would continue to be felt for recent first home buyers.

But Grattan Institute fellow Brendan Coates told news.com.au that the impact of any tighter lending conditions would be largely confined to a small section of borrowers as rising house prices had given borrowing room to homeowners who had been in the market for several years.

He predicted the impact would largely be felt in those who’d borrowed more than 90 per cent of the value of their house, a number which had fallen in recent years from 14 per cent in 2014 to 7 per cent in 2018.

But he did say that if house prices in Sydney and Melbourne continue their fall then the pain could spread to more borrowers.

PROFESSIONAL MORTGAGE BROKER

PERTH’S TRUSTED REAL ESTATE AGENT

Home Mortgage Financing

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Ideally, traditional mortgage lenders want new home buyers to have a 20% down payment when purchasing a new home. Thus, if purchasing a $200,000 home, you should be prepared to have $40,000 as a down payment.

Unfortunately, many people do not have this kind of money lying around. For this matter, Mortgage insurance (MI), known as Lenders Mortgage Insurance ( LMI) was created as a way for mortgage companies to recoup their money if a homeowner defaults on the loan. There are various loans available to assist people with down payments. In some instances, homeowners can obtain 100% financing, and avoid LMI.

What is LENDERS MORTGAGE INSURANCE?

Because Australians are earning less money, and home prices are steadily increasing, the majority of the population is unable to save the recommended down payment of 20%. In order to make owning a home possible, mortgage companies created a particular mortgage insurance, (LMI), for people with less than 20% to put down on a home. This insurance protects the lender if you default on the mortgage.

How to Avoid Paying Lenders Mortgage Insurance?

On average, LMI may increase your mortgage payment by $100 – sometimes less, sometimes more. However, there are ways to avoid paying this additional insurance. The obvious involves having at least 20% as a down payment. If this is not an option, homeowner may agree to a higher interest rate. Another tactic entails getting approved for 100% financing.

How Does 100% Mortgage Financing Work?

100% mortgage financing makes it possible to buy a home with no money down. Also referred to as a piggyback loan or 80/20 mortgage loan, 100% mortgage financing involves obtaining a first mortgage for 80% of the home cost, and a second mortgage, or home equity loan, for 20% of the home cost. Together, the first and second mortgage allows a home purchase with no money down, and no lender mortgage insurance.

A recent report from the International Monetary Fund (IMF) warns of world-wide economic downturn ­– but the Government and two leading property experts weigh in on what waits ahead for the Australian property market – and it seems we may not face the brunt as prices are expected to take a steady ride up.

Whilst widespread debt, trade wars and economic dips in parts of Europe are listed as major factors at play for the IMF diminishing economic growth forecasts, locally felt struggles in Australia have come about from the drought, housing market decline and credit crackdown.

However, the IMF report and national shadows have not shaken the Federal Government, encapsulated in a speech delivered by Treasurer Josh Frydenberg, which assured Aussies they will not bear the brunt.

“Our economic plan with its focus on growth, productivity, and aspiration and budget repair, takes on an even greater significance as we navigate the currents ahead,” the Treasurer said, also stressing that if the Australian economy was to continue in strength, confidence had to be returned to the housing market.

But where do such hopes leave the housing market amidst dropping property values and tightened lending laws? Despite growing concerns, industry experts say it’s going to be on the up.

‘After a tumultuous 12 months for Australia’s property markets, 2019 looks likely to be a year of greater stability,’ says Domain economist Trent Wiltshire in a recent report – in which he reveals the market will continue to experience a softened dip over the next six months, before gearing up again ‘into another moderate growth phase’.

‘Solid population growth, low unemployment and low interest rates will underpin Australian property price growth in the medium term. More restrictive lending conditions will continue to weigh on prices in the immediate future. But eventually, borrowers will begin to adjust to this new normal,’ the Domain economist says.

A norm that sees Aussies adjusting to, and better understanding how much they are entitled to borrow and the length of time it can take to get a loan, both of which Wiltshire believes will lead to an increase in borrowing  – also ‘at a modest pace’.

When broken down in Wiltshire’s report, combined Australian house prices, which sat at an estimated -6% in 2018, are predicted to climb to 1% this year, before reaching 4% in 2020.

Even more growth is expected to occur with unit prices across the country, forecast to climb from -3% to 2%, then 3% in 2020. Property prices have been on a decline since 2017, and although having snowballed, stricter lending laws should be accounted for but a fraction of the cause.

‘Falling sentiment has a reinforcing effect on prices: as prices fall, buyers become more hesitant, further pushing down prices … Another factor at play is that lots of new housing hit the market after a high rate of new construction in the previous couple of years,’ Wiltshire says.

He also invites us to reflect on the upcoming Federal election, which could harm property prices, especially if the Labor party is to be voted into power. Wiltshire expresses concern over the party reducing the capital gains tax discount from 50% to 25% if they pull through, likely to be enforced by 2020 – leading to fewer investors being inclined to put their capitals into the property playfield. A leading real estate CEO weighs in on similar sentiments.

“Uncertainty about changes in policy, such as Labor’s proposal to limit negative gearing tax breaks to new investments, and halve the capital gains tax, will cause an extended period of stagnation,” says CEO of Starr Partners Douglas Driscoll in his market forecast for the year ahead.

In referring to the Federal Government’s challenges to adhere to the banking royal commission’s recommendations as a “balancing act” – for Government still also needs to “ensure that people are able to easily access credit” –  Driscoll warns that careful attention needs to be paid to the banks for their potential to “low ball buyers on valuations”.

“Anyone who is struggling to secure lending should contest the valuation. It is possible to request a second opinion, or alternatively, provide extensive comparative evidence for similar properties that have sold in the area,” he advises. Driscoll also delivers good news to property owners.

Those paying down mortgages should take advantage of Australia’s record low interest rates, which Driscoll says will continue to remain low into the first part of this year, and thus be of advantage to mortgage holders in the long run especially if they are willing to dig into their disposable incomes.

“It is advisable that homeowners pay down as much debt as they can while we have this advantageous environment,” Driscoll says. “Paying an additional $150 a month on a $600,000 loan could save a homeowner more than $10,000.”

Auctions have never been an Aussie’s favourite thing to do on a weekend, and according to Driscoll, many will be “too embarrassed” to put their properties under the hammer, largely due to auction clearance rates sitting at around the 50% mark. But he has faith, reminding sellers they “need to trust the auction process and know that several properties also sell before and after the actual auction day”.

Getting a house of your own is a lifetime achievement and a home mortgage helps you in achieving this milestone much earlier than it would otherwise have been possible. In fact, the first home mortgage is also filled with a lot of emotion. A home mortgage is really something that makes dreams come true.

So let us start with understanding what a home mortgage actually is?

A home mortgage is something that allows you to buy a house even if you do not have enough money to pay for it right away. This is made possible by borrowing money from someone and paying it back in monthly instalments. The person who lends you money is called the home mortgage lender. The home mortgage lender lends you money for a specific period (up to 30 years) during which you are expected to pay back the money in monthly instalments. There are certain terms and conditions associated with the home mortgage agreement and these terms and conditions govern the home mortgage throughout its tenure. Among others, the most important thing is the interest rate that the home mortgage lender charges you. Interest charges are the means through which the mortgage lenders earns on this financial transaction called home mortgage. Most home mortgage lenders offer various home mortgage schemes/options. The most important variation in these schemes is in terms of the interest rate and the calculations related to it. In fact, most home mortgage options are named after the type of interest rate used for that option. Broadly speaking, there are two types of home mortgage interest rates – FRM (fixed rate mortgage) and ARM (adjustable rate mortgage). For FRM, the interest rate is fixed for the entire tenure of the home mortgage loan. For ARM, as the name suggests the home mortgage rate changes or adjusts throughout the tenure of the home mortgage. This change or adjustment of mortgage rates is based on a pre-selected financial index like treasury security (and on the terms and conditions agreed between you and the mortgage lender). That is how mortgage works.

No matter what type of home mortgage you go for, you always need to pay back the entire home mortgage loan (with interest) to the mortgage lender. Failing to pay back the mortgage lender can result in foreclosure on your home and the mortgage lender can even auction it off to recover the remaining debt.

Therefore, home mortgage is a wonderful means of getting into your dream home much earlier in your life. Without this concept, you would have to wait for a long time for getting into that dream home. Really, a home mortgage is one of the best concepts from the world of finance.

If there is anything that can prove the impact of stricter lending rules by lenders in Australia, it would be the latest data on home-loan rejections.

According to Digital Finance Analytics (DFA), 40% of home-loan applications were rejected in December due to non-compliance with existing lending standards.

While this is a drop from the previous month’s 48% rejection rate, it is still significantly higher than last year’s 8%. It is important to note that the volume of applications across all segments leading up to the holiday season has decreased and that many households have filed multiple home-loan applications.

“The fall in investor applications is significant, as appetite for investment property eases. The relative volume of refinance applications remained quite high, as people are seeking to reduce their monthly repayments,” DFA principal Martin North said.

Compared to authorised deposit-taking institutions (ADIs), non-banks recorded lower rejection rates at 20%.

North expects the number of rejections to remain prominent this month as the number of loan applications continues to grow.

For investors, he suggested watching the availability of credit, as moderation of loan offerings could result in a price decline of up to 30%.

“As credit drives home prices higher, so the reduced availability of credit drives prices lower. Our own view is a fall of 20%-30% peak-to-trough over the next two to three years,” North said, adding that the fall could worsen if global uncertainties are factored in.

Finance can be the most important thing for anyone with dreams to fly in his eyes. Today our world runs on finance. The forms may be different but the purpose is the same, to cater to our needs. When we fail to cater our needs due to lack of enough funds within our resources, we look outside for them in form of loans. One such way of funding our desires is secured home loans.

A secured home loan is secured by your home as security. These loan are like any secured loan and can be used for any of you personal purpose. The advantages of such loans are following:

• Interest rate is low as the loan amount is secured.
• Repayment is spread over a longer periods resulting in smaller monthly payments.
• Flexible terms and conditions for loans.
• Higher rate of approval of loans ensure you that you will be getting the loan approved easily.
• Online option is there to choose and apply easily
• Reduced paper work
• Faster approval once your property is valued.
• Multipurpose loans (can be used for debt consolidation, medical expenses, education, buying a car, boat, vacation, home improvement etc)
• People with bad credit history can also apply.
• You can borrow up to 125% of your collateral value.

Secured home loans come in various flavors to choose from:

• Fixed loans – the interest rate will remain fixed under this for the whole repayment term.
• Variable loans – rate of interest will fluctuate according to interest rates in the market.
• Capped loans – a limit is set up to which your interest rate can rise with rise in interest rate in the market.

You can decide among these according to which rate suits you the best.

A secured home loan allows you to borrow amount ranging between $30,000 to $100,000 on the basis of equity in your home. Equity is the market value of your home less any debts taken against it.

Shopping for a right loan lender is one thing which every borrower must do before applying. There are lot many lenders in the market with different rates and terms.

It happens may time that you came to know about a low rate package after you have already applied for the loan. So to avoid this do proper research, visit lenders offices and study their quotes. Your hard work can help you find out the best secured loan out of the rest.

 

TRUSTED MORTGAGE BROKER AUSTRALIA

PROFESSIONAL REAL ESTATE AGENTS KENWICK

PREMIER CLEANING COMPANY IN PERTH

3 Steps You Must Do If You Want To Pay Off Your Mortgage Early

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All Australia home buyers use a mortgage, that only benefits banks and mortgage companies. Now a revolutionary mortgage program is available that will show them how to pay off their home mortgage in as little as 7 years.

Money Principal Group, a company located in Utah, founded by Ariel Metekingi. Their premier innovative mortgage product, The Mortgage Eliminator, is based on a 30 year+ proven Australian industry standard and model in use by over a third of homeowners in that country.

This powerful new tool to combat the current financial plague of debt combines a mortgage and a full-service bank account. The new “all-inclusive” type loan creates huge savings in interest payments and loan payoffs in one-half to one-third the time requiring little to no change to current spending habits or income.

How does it work? Homeowners deposit income and other assets into the new mortgage account and since it allows access like a checking account, expenses are paid out from it by check or ATM card. The fundamental part is, that when the homeowners’ money isn’t being used it sits in the mortgage account, reducing the daily loan balance on which interest is computed. This saves on average hundreds of thousands in interest over the life a typical loan and reducing interest means more money for principal; so the homeowner builds equity faster and owns their home sooner.

There are three steps that the consumer can take, in order to reduce their mortgage payout and enjoy a home paid off in as little as 7 years.

1. Decide what your goals are

One of the first steps with The Mortgage Eliminator program is to have a clearer picture of where you are heading financially-speaking, and decide on what kind of goals you’d like to reach. First take a look at where you were five years ago. What kind of expectations did you have than? Did you plan on certain things to happen by now? If they didn’t happen, do you have the willingness to make changes to reach those goals?

 

Using your flexible mortgage account through The Mortgage Eliminator can greatly increase your ability to save interest and money and free up resources to help you reach those goals. And it doesn’t have to drastically change your spending habits or current household income. Just determine your budget and where the money you make is spent in your life.

2. Set up a budget

The next step in paying off your mortgage quickly is to look at your current spending habits and create a budget. How difficult is this? That depends on your level of commitment and your ability to discipline yourself into reviewing your budget.

One way that helps homeowners is through the included budgeting software and personal coaching and review available with The Mortgage Eliminator, from Money Principal Group. With The Mortgage Eliminator, you’re given that important part, a coach to review, create and stick to a budget that creates positive cash flow, which will take you to the next steps of paying off your mortgage in less time, without any change to your current income or spending habits.

3. Get a financial review and analysis

In order to determine just how quickly you can pay off your current debts and mortgage (or how fast you can pay off your first home, if you’re a first-timer), a financial “snapshot” or review must be completed. Taking a look at your entire picture of income, debts, and how it relates to your goals, is the crucial step, in determining how best you should start your plan.

What is the strategically best way for you to reach your goals? With a financial review and analysis from Money Principal Group, a plan is created to show you the best options that HELPS YOU in reaching those goals quickly. Only a loan that SAVES YOU MONEY is offered and if it doesn’t make strategic, financially sound sense for you, it’s not offered and a different course of action is suggested.

For more information on how you can be debt-free and pay off your home mortgage in as little as 7 years, and experience the savings with the Money Principal Program using their proprietary calculator, visit www.PDXLoan.com or call 1-800-862-0784 ext 21.

 

LOCAL TRUSTED MORTGAGE BROKERS

KENWICK REAL ESTATE AGENTS

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Being Straight With Debt Counsellors

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‘Credit card debt’ is the worst of all nightmares. Credit card debt settlement is a wonderful stress relieving mechanisms. Once you are done with your credit card debt settlement, you are assured of a much better life.

You can approach credit card debt settlement in 2 ways. You can either go for credit card debt settlement all by yourself or you can take advice from a credit counselling company or a professional.

If you go for credit card debt settlement all by yourself, you will need to analyse the various options available to you e.g. checking on various balance transfer offers available in the market, checking the short term loan options with the banks etc etc. However, if you want to take credit card debt settlement advice from a professional, you should be able to trust the advisor fully. So you need to check the credentials of the credit card debt settlement advisor/company.

These credit card debt settlement companies/advisors will be able to help you in the best way if you tell them your current financial situation correctly. Your future plans are important too, as they might influence the decision on ‘What route for credit card debt settlement would work the best for you’.

Moreover, once you are done with your credit card debt settlement, you should also take measures to avoid falling into that pit again.

 

 

Checking Mortgage Rates Online

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Homeowners who are planning to re-finance their home may find the Internet to be a very worthwhile resource. The Internet is useful because it can give the homeowner a wealth of information as well as the ability to compare different rates from different lenders at their convenience.

One of the most popular advantages to researching re-financing online is the ability to comparison shop at the homeowner’s convenience.  Homeowners can also take their time comparing the quotes they receive from these lenders online instead of feeling pressured to provide an immediate response.

Homeowners who are using the Internet to research re-financing options and obtain quotes should carefully consider their sources.  Homeowners who stick with well known lenders and established websites will not likely encounter problems but those who select a new lender may be surprised by the results of the re-financing attempt.

Homeowners should also take care not to be fooled by fancy web design. A website which looks very professional is not necessarily a website which is accurate and informative. Many skilled website designers can create websites which are both attractive and professional looking.

While shopping for re-financing options online is certainly easy and convenient, homeowners should consider completing the application process in person. Completing the re-financing process in can  prevent the homeowner from being surprised by any elements of the mortgage re-finance. This may include additional fees which are tacked on during the processing of the application, rates which are only available in certain situations or other elements of the re-financing agreement which could significantly impact the homeowner’s decision making process.

LOCAL REAL ESTATE AGENT