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How your shopping habits could hurt your chances of securing a mortgage

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Are stricter rules slowing down home-loan approvals?

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Banks’ more stringent credit checks seem to be affecting the way they approve new home loans, two of the biggest Australian lenders say.

In a Reuters report, NAB interim CEO Philip Chronican said the stricter lending rules are affecting loan approvals and are inhibiting loan growth.

“Most borrowers who previously would have qualified for a home loan continue to qualify for a home loan,” he said before the House of Representatives Economics Committee in Canberra.

However, he said potential borrowers now have to verify up to 13 claims about their spending.

“However, the documentary requirements that are now being asked of our frontline bankers are such that it slows the process down and as a result, we are lending less in home lending that we might otherwise be able to,” he said.

NAB chief financial officer Gary Lennon shared the same insight, adding that while home-loan approval rates remain unchanged, the number of applications numbers have significantly gone down “as a result of the difficulty getting all the information together.”

Speaking at the same hearing, ANZ chief executive Shayne Elliott said the banks are still willing to lend despite the greater focus on responsible lending.

“Let me assure you that ANZ is ready to lend, especially for housing and small businesses. After a period of perhaps being too cautious, ANZ is easing back towards a sensible equilibrium,” he said.

However, Elliot noted that the debate on responsible lending has led to banks becoming more conservative in approving home loans.

“As a result of that, Australians … some, not all, will find it a little bit harder to either get credit or get the amount of credit that they would have otherwise had in the past or would like, and I’m not suggesting for a minute that’s wrong, it’s just the reality,” he said.

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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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How Does Rental Do In 2019?

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Australia’s property market has experienced a significant downturn over the past year, driven mostly by losses in Sydney and Melbourne, but there are signs of an imminent improvement.

A growing number of buyers are starting to emerge with the belief that the downward trend will bottom out and plateau in coming months, before prices begin to rise.

Buyer’s agent Nick Viner believes now is the time to buy in Sydney and Melbourne, with many discounted premium properties available with minimal competition.

“This environment is the absolute perfect time to buy because you’ve got more time to consider your options and there’s more choice in terms of available homes,” Mr Viner, principal of Buyers Domain Australia, said.

“You also have the ability to focus on really blue chip properties in your budget. You can bag a more superior property that you can really only get for cheaper in markets like this.”

Most economists believe the total property price falls in Sydney will be within the vicinity of 15 per cent, which means some prime suburbs have already bottomed out.

“I saw the data out on Monday that the market in Sydney has come off nine per cent from its peak last year. What I’m finding in some suburbs is that price declines are probably closer to 10 to 15 per cent, even 20 per cent in some instances. I think we’re probably reasonably close to the bottom.”

Although this assessment is not universal, he said, with homes in less desirable suburbs and investment properties likely to see further falls.

“In general terms, the closer you are to the CBD the more likely prices will hold and then recover first.”

When it comes to future price prospects in other markets, the latest analysis by BIS Oxford Economics concluded that Brisbane, Canberra and Perth will record the strongest growth in the next three years.

Although in almost all locations, the investor market is likely to remain sluggish in the medium-term due to tighter restrictions by banks and sharp falls in rental returns.

Rents have fallen in large parts of Sydney and Melbourne after a prolonged period of flat growth, Mr Viner said.

“That makes it an interesting time for investors,” he said. “I can’t recall a time where rents and sale prices have gone down concurrently.”

Mortgage Choice boss Susan Mitchell said prospective buyers are struggling with tighter lending criteria from banks in the shadow of the royal commission.

Despite home values falling, it is much tougher to buy than during the boom due to difficulties in obtaining a mortgage, Ms Mitchell said.

“This tightened lending environment, means a larger number of Australians are experiencing difficulty securing a home loan due to new, stricter assessment criteria in which their savings and living expenses are being forensically examined.”

Ms Mitchell believes house price slumps could usher in a new crop of buyers, who will eventually drive renewed growth.

“The decline in dwelling values, particularly in the nation’s capitals, could open the door to those looking to get their foot in the property market,” she said.

A survey of experts and economists by comparison website finder.com.au found the majority support ANZ’s prediction of 15 to 20 per cent falls in total in Sydney and Melbourne.

“ANZ’s suggested 15 per cent drop would see $145,500 and $118,500 wiped off the average house price in Sydney and Melbourne respectively,” said finder.com.au insights manager Graham Cooke.

“A 20 per cent drop would see nearly $200,000 disappear from the equity of Sydney homeowners.

“If we do see these types of price drops in the market, recent homebuyers who laid down a 20 per cent deposit could see themselves in negative equity by the end of the year.”

In one booming Australian city, you can pick up an entire family home for $250,000. And savvy investors are now snapping them up.

We all know Sydney’s property market has taken hit after hit recently — but there are other lesser-known areas that are experiencing a sudden property boom.

That’s according to Australian real estate experts, who claim that while investors may have deserted Sydney and Melbourne, their attention has turned to other regions across the country.

According to Daniel Walsh of investment buyer’s agency Your Property Your Wealth, investment activity has now firmly shifted to Queensland.

“Net migration has now overtaken Melbourne due to the affordability that Brisbane has to offer,” he explained.

“We’re also seeing rising demand particularly in the housing sector in southeast Queensland where yields are high and jobs are increasing due to the amount of government expenditure around infrastructure which is attracting families to the Sunshine State.

“With Brisbane’s population growth at 1.6 per cent and surrounding areas like Moreton Bay at 2.2 per cent, the Sunshine Coast at 2.7 per cent and Ipswich at 3.7 per cent, we are forecasting that Brisbane will be the standout performer over the next three to five years.”

Realestate.com.au chief economist Nerida Conisbee agreed, saying Sydney investors especially had started to turn their attention north.

“In Tasmania, most activity is definitely taking place in Hobart, but it has shifted — a lot of the action was in the inner city, but it’s now happening in the middle and outer ring suburbs, as well as in Launceston.

“Tweed Heads and Byron Bay (in NSW) have also had strong price growth at the moment,” she said, adding that in Sydney, trendy inner-city suburbs like Paddington, the premium end of town and areas like Winston Hills in the city’s west were defying the downward trend.

Ms Conisbee said long-neglected Adelaide was also finally booming after recently hitting the highest median house price ever recorded, largely driven by jobs and economic growth off the back of defence contracts, the announcement of the new Australian Space Agency and other investment in the area.

“Inner Adelaide, beachside and the Adelaide Hills tend to have the most activity but there’s also quite a lot of rental demand in low-cost suburbs so we’re expecting to see a bit more investment there in those really cheap suburbs over the next 12 months,” she said.

“There you can get houses for $250,000 so for an investor, it’s a relatively low cost in terms of outlay and the area is seeing really strong rental demand which means you’re more than likely to get tenants, so for investors it’s a really attractive area.”

Mr Walsh said Sydney still remained a solid investment option in the long term — but stressed it was just not the right time to buy in the city due to its market cycle as well as lending constraints.

“While property prices in Sydney have softened by about 9 per cent this year, they are still high, which means it’s not an affordable option for many investors,” he said, noting the city’s high buy-in prices coupled with relatively low rents made the yields quite unattractive.

“At this point in time, the high costs of entry as well as holding costs make it a location that should be avoided — but not forever,” he said.

“The thing is, Sydney is still Sydney, which means that it will always be in demand.

“Its population is forecast to grow by some three million people in the decades ahead, plus it remains our nation’s economic engine room.”

He said the entire NSW economy remained “robust” with unemployment falling to 4.4 per cent last year, with Sydney’s major infrastructure program also proving there was “much to be positive about” in Sydney.

“Sydney homeowners and investors who bought a number of years ago are still well ahead because they chose the optimal time to buy and they remain focused on the future,” he said, adding the optimal time to re-enter the market probably wouldn’t be for at least another year or two.

Queensland

In the Sunshine State, most activity has been centred around the South East and Gold Coast regions, with Brisbane, Moreton Bay, the Sunshine Coast and Ipswich booming along with the Gold Coast, Tugun and Burleigh Heads.

 

Tasmania

In Tassie it’s all about Hobart, although activity has spread beyond the inner city and into the middle and outer rings, while Launceston has also recorded solid interest.

South Australia

The entire South Australian capital is booming, although most activity is happening in the inner city and Adelaide Hills.

NSW

While many investors have deserted Sydney, areas such as Paddington and Winston Hills and the nearby Central Coast are doing well.

Other booming areas are further north in Tweed Heads and trendy Byron Bay.

 

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“Interest is strong in the Gold Coast across the board although there’s more action on the south side in places like Tugun and Burleigh Heads,” she said, adding there was also a notable trend towards Tasmania, Adelaide and pockets of NSW.

Keeping An Eye On Housing And Interest Rates In 2019

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While stock pickers give their guidance for the S&P/ASX 200 (INDEXASX: XJO) in 2019, it’s important to take a look at what is going to drive the Australian stock market.

Drivers both domestically and from abroad

How our domestic economy runs in 2019 will directly impact our local share market but we also feed off strength from offshore markets such as the US who lead the rest of the world.

Australia is not in the same position as the US who is in a defined tightening cycle, meaning interest rates are rising.

The US central bank, the Federal Reserve, raised the target range for the federal funds rate by 25 basis points to 2.25-2.5% during its December meeting, its fourth hike of 2018.

Furthermore, the Federal Reserve foresees two more rate hikes in 2019.

Rates in Australia aren’t necessarily rising

The last interest rate hike in Australia was November 2010 and our last rate cut was August 2016.

Our interest rate has been at 1.5% since August 2016 and while the expectation is for Australia to follow suit with the US and start raising interest rates, we may not be ready.

The US economy was experiencing growth, lower unemployment levels and signs of inflation, which forced its central bank’s hand to begin their tightening cycle (rising interest rates).

Australia’s economy is experiencing positive signs of growth, unemployment and inflation but not yet to the same degree that warrants a rate hike according to our central bank, the RBA.

Snippets from the RBA’s December statement

The RBA’s Governor Philip Lowe in the December monthly statement said: “The Australian economy is performing well.

“The central scenario is for GDP growth to average around 3½% over this year and next, before slowing in 2020 due to slower growth in exports of resources.”

He added: “The outlook for the labour market remains positive. The unemployment rate is 5%, the lowest in six years.

“With the economy expected to continue to grow above trend, a further reduction in the unemployment rate is likely.”

He also said: “Inflation remains low and stable. Over the past year, CPI inflation was 1.9% and in underlying terms inflation was 1¾%.

“Inflation is expected to pick up over the next couple of years, with the pick-up likely to be gradual.

“The central scenario is for inflation to be 2¼% in 2019 and a bit higher in the following year.”

Housing market is key in 2019

Housing is very important for our domestic economy due to the ripple effects it has within our economy.

In a market of rising house prices, it is not just the home owner that experiences a positive wealth effect.

There is also the lender, the valuer, the mortgage broker, the real estate agent, the advertising, the tradesmen, the gardener, the insurance… the list goes on.

Let’s use an example of a person who bought a $1 million property with a $200,000 deposit ($200,000 equity, $800,000 debt).

If that house increased to $1.05 million in value, assuming the debt is the same, the equity component increases to $250,000, increasing the wealth by $50,000.

This person is a lot more likely to book a holiday, dine out at a restaurant, or pay to get their car washed.

If the housing market continues to fall, the wealth effect reverses and it can reach further across our economy than you may think.

Our central bank keeps a keen eye on housing

With housing being a large driver of our domestic economy, the RBA knows it must be well-informed on the state of the housing market to make policy decisions.

Lowe said in the December monthly statement: “Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low.

“Credit conditions for some borrowers are tighter than they have been for some time, with some lenders having a reduced appetite to lend.

“The demand for credit by investors in the housing market has slowed noticeably as the dynamics of the housing market have changed.

“Growth in credit extended to owner-occupiers has eased to an annualised pace of 5–6%.

“Mortgage rates remain low, with competition strongest for borrowers of high credit quality.”

The much-anticipated report from the Royal Commission has been met with mixed reactions from different groups and stakeholders. But the ultimate question is, will it really benefit borrowers in the end?

Arthur Moses, president of the Law Council of Australia, said the recommendations will have a far-reaching impact on the banking and financial services sector and will ensure that consumers will be treated fairly.

“Australians were rightly shocked by some of the stories heard during the extensive Royal Commission hearings – of profit being put before people and in some instances the rule of law,” he said.

Amongst the 76 recommendations made by Royal Commission is the ban on trail commissions starting July next year. Over the next three years, mortgage brokers will be shifting to a consumer-pays model.

While this recommendation is intended to make sure that clients’ best interests are protected, some think this would only cater to the pockets of big banks.

Mortgage & Finance Association of Australia CEO Mike Felton said the Royal Commission’s recommendations put the broker channel at risk and will likely impair competition and damage access to credit.

“I fail to see how decimating the broker channel, leaving Australians with a handful of lenders to choose from, is good for competition, or good for customers,” he said.

A consumer fee-for-service model will mean brokers and smaller lenders will no longer be able to compete on a level playing field with major banks, he said.

“This sort of fee would see consumers deserting brokers, cutting access to smaller lenders and driving consumers into the branches of the major lenders. This will increase bank power, and make getting access to a home loan harder and more expensive for home buyers,” Felton said.

Pure Finance founder Brendan Dixon said banning broker commissions will only boost the profits and be an advantage to big banks.

“On top of this, how will low-income-earning Aussies afford a fee for a mortgage broker to get a cheaper deal? They won’t, but the rich will (if there are any brokers left),” he said.

However, some industry experts expressed hope that the recommendations will put an end to the over-the-top credit restrictions that have been in place for more than three years.

Property Investment Professionals of Australia (PIPA) chairman Peter Koulizos said these limitations have already started putting the economy in jeopardy.

“Solid borrowers, who should have no problem securing finance under normal credit conditions, are getting knocked back for silly reasons such as spending $50 on Uber Eats on a Friday night,” he said.

Mortgage industry is playing an important role today to meet the people’s needs. The industry is constantly engaged in making changes and bringing new ways to assist people in some of their most important personal and financial decisions. The industry is involved in making changes to suit people’s requirements keeping in mind their financial conditions. Along with conventional fixed rate products mixtures of typical adjustable rate mortgage products, interest-only and payment option type ARMs, high LTV financing and FHA products have been introduced. This expansion and variety in the products is intended to help larger number of people to qualify for the home ownership. There is a fair competition among the lenders to provide customers with the best rates staying within the boundaries of State law. Customer satisfaction is paid maximum importance today. This trend has helped the borrowers belonging to all levels as the positive affect is now reaching people on a wider range. People have got the opportunity to take advantage of a wide range of products available in the current market. This has raised the buying process with a greater mass being able to participate in the program. But with this positive feature there has been a recent trend of increase in the number of fraud cases in the industry which is a growing problem in the industry today.

According to the Royal Commission, the number of fraud cases in the mortgage has increased over the recent years. Mortgage companies have been using false documents and getting them signed by borrowers. Many of them have even charged high interest rates and borrowers have been making such high interest payments due to lack of awareness on recent market trends.

It is found out that an average homeowner in Australia has to pay $1250 more in sub-prime mortgage industry. Sub-rime mortgage are offered to high risk borrowers who may have been rejected by other lenders. In recent years this industry has seen a considerable growth with a lot of consumers getting qualified for this loan. Consumers who face difficulty with the credit market are generally availing this loan. But, this growth has simultaneously given rise to predatory lending affecting the most vulnerable lenders. This kind of abusive lending is generally directed to the lower income and minority borrowers. Generally the elderly homeowners with reduced incomes become the target of these sub-prime home equity lenders as they often have considerable amount of equity in their homes. The most harmful practice begins with a loan based on the home equity rather than on borrower’s ability to repay. These borrowers often fail to repay and the lenders acquire the borrower’s home equity and ultimately the borrower loses his home through foreclosure or by signing a deed to the lender in lieu of the foreclosure. There are some other kind of abusive practices which are illegal under various federal or state laws.

Considering the growing rate of predatory lending in the mortgage industry, the Royal Commission has decided to have an audit service for protecting homeowners from abusive lending practices. But borrowers should also be aware of such unlawful activities and keep themselves away from such lenders.

Borrowers should consider some preventive measures to protect themselves from predatory lenders. They should not go by the rates that lenders often advertise. These rates are in fact, much lower than the actual fees charged by such lenders. The lenders advertise such low rates just to lure consumers so that they can approach them for loans.

Borrowers should demand a written copy of the fees that they keep paying to the lender on a monthly basis. This is because lenders often provide an estimate of fees at closing and later they charge higher fees pretending that they have forgotten to include these charges. But keeping the proofs of such documents will help borrowers in case of any discrepancies in the mortgage process.

If there is a rise in rate in the market during the time period between the application and closing, the lenders charge higher rate to borrowers. On the other hand if the rate falls downwards, the lenders try to ignore it and the borrowers are deprived of the advantage of the lower rate. So, the borrowers should monitor the market during this period.

The borrowers should try to keep a track of all the documents involved during the process and ask for proper clarifications wherever they have a doubt. Going this way will minimise the problems of being cheated by the mortgage companies to some extent. The borrowers should try to consult an Attorney or a professional known to the borrower and get the documents verified by them.

 

PROFESSIONAL MORTGAGE BROKER PERTH

LOCAL 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

A Quick Guide To Home Mortgage Rates

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Home mortgages are loans that are taken to buy a property, for which the property itself is used as collateral. Owning a home is a very big, and usually a one-time investment for many. With increasing real estate prices and decreasing interest rates on loans, many people are using the home mortgage loans to buy property.

Home mortgage rates are the rates of interest that are to be paid along with the capital for taking the mortgage loan. Home mortgage rates do not remain steady over a long period of time. A lower rate means lower monthly payments, leading to lower costs on the property. Depending on the kind of interest rate, there are two kinds of home mortgage loans: Fixed Rate Mortgages (FRMs) and Adjustable Rate Mortgages (ARMs). FRMs are mortgages for which the rate of interest remains the same for the entire period of the loan. These can be for a period of 10, 15, 20 or even 30 years. Adjustable rate mortgages, on the other hand, have fluctuating rates of interest. This is ideal when there is likelihood of the rates to decrease. ARMs are preferred by people who plan for shorter periods. ARMs are offered at lower rates than FRMs to attract customers, but they also contain a certain level of risk. The fixed rate mortgages are a very predictable, safe option.

Mortgage rates fluctuate on the basis of an economic index. The mortgage bond market works according to a process called securitization. This securitization enables creation of more loans and greater mobility of funds by keeping the mortgage rates low and allowing more credit for ideal customers.

The best source for knowing about home mortgage loan rates is the Internet. Most home mortgage loan companies provide information through their websites also. These rates are updated daily. Their sites also have easy-to-use home mortgage calculators that give all information, including payments to be made each month and the tax advantages, with the single click of a button. Most of them also have financial advisors who would provide advice online, or over the phone. A professional mortgage lender would be able to provide accurate information about the mortgage loan rates as and when they are applicable.

The National Australia Bank is keeping its variable mortgage rates on hold despite moves by its big three rivals to hike rates in response to increased funding costs.

NAB’s chief executive, Andrew Thorburn, indicated the bank’s decision was a direct result of an environment in which huge profits and revelations of misconduct aired at the royal commission had damaged the big banks’ public standing.

“We need to rebuild the trust of our customers, and by holding our NAB standard variable rate longer, we help our customers for longer,” Thorburn said.

“By focusing more on our customers, we build trust and advocacy, and this creates a more sustainable business.”

Thorburn said the bank would continue to monitor funding conditions but wouldhold its standard variable rate at 5.24%.

The prime minister, Scott Morrison, reacted to NAB’s decision by tweeting it was a good call: “They seem to get it,” he said.

Westpac, Commonwealth Bank and ANZ have over the past two weeks said they would raise their standard variable rates for owner-occupiers to 5.38, 5.37 and 5.36% respectively.

The out-of-cycle hikes by NAB’s rivals led to economists last week suggesting the Reserve Bank of Australia would keep the cash rate on hold at a record low of 1.5% for even longer than previously thought.

The RBA, which has not moved on rates since August 2016, would be wary of increasing the load on borrowers – and decreasing the amount they can spend elsewhere in the economy – and could even cut the cash rate if the banks hike further, AMP chief economist Shane Oliver said.

 

Many homeowners in Australia are starting to plan for their next move, with more than a third thinking of upsizing or downsizing in the next five years.

This is one of the findings of the latest Westpac Home Ownership Report, which revealed that there was a 29% growth in the number of homeowners who are prioritising buying a new home in the next five years over other housing-related activities like renovating and investing.

In fact, the number of homeowners preferring to renovate has actually decreased by 3%, while those planning to buy an investment property remained the same.

Westpac head of home ownership Lauren Fine said the housing downturn has created opportunities for motivated buyers to consider locations which were previously out of reach. This was borne out by the report, which said that homeowners are over twice as likely to buy a home to live in a more desirable area.

“For example, larger properties in the inner suburbs of major cities have seen declines in value in the later part of 2018, making these popular areas more accessible,” Fine said.

When it comes to relocating, upsizers and downsizes have different priorities. Upsizers tend to consider safety and proximity to work and social hubs as essentials, while downsizes are more likely to have access to public transport and proximity to their family and friends in their checklists.

With regard to financial challenges, upsizers are expected to go through some tougher times ahead when looking for a new home.

“Given the financial challenges upsizers expect to face, this could explain why they are more likely than downsizes to be willing to take fewer holidays in order to achieve their housing priority,” Fine said.

However, this does not mean that downsizes won’t face challenges. They actually face a different hurdle: managing the move and reducing the amount of “stuff” they have.

Either way, Fine said moving out and looking for a new home will come with emotional challenges.

“It can be difficult to leave a home to move into the next, particularly for downsizes who may have seen their family grow up in that home. Up sizing can also be tricky, particularly if it requires making certain compromises for more bedrooms,” she said.

However, there are benefits too, particularly for downsizes, given that a small home will require less upkeep and maintenance. On the other hand, upsizers will come to realise that living in a more “breathable” house with enough rooms is worth it, especially with growing families.

There are a few things you should consider when you are looking for an online lender. These tips are things you should look for carefully and completely prior to making any decision to work with a specific online lender. By following these tips, you will help ensure that you are working with a reputable company for all of your lending needs, as well as a company that will work well with your entire situation.

First look at the web design of their entire webpage. This should be just as important to you as it would be if you were to say, walking directly into a store. Things you should look for in their website should include the ability to obtain the needed information without hassle; you should not have to click fifty times to gain the information you need about their company. Additionally, you will want to look at the way the page loads for you fast or slow and take notice of errors. A fast loading website, with no errors, will indicate they have a server that is reliable, therefore showing they are concerned enough about their customers ability to access their site that they have obtained someone reliable.

You will also want to make sure they have a solid, reasonable, easy to read, and easy to access privacy policy. This is extremely important, any website that is trustworthy will have a privacy policy clearly posted that explains what they will do with the information gathered from your online application.

Look for a business with a solid history, each website should contain an about us page. If they do not have one, it is in your best interest to immediately discredit that particular online lender from your list. You will want to look at various thing such as, how many years have they been in operations, what area of the world do they do business from, make sure they have an easy to spot telephone number, address, and emails for the various departments you may need to contact.

Another particular piece of advice that any person looking for an online lender should follow is to find a little bit about their reputation. There are several different ways you can go about this, the first way is by speaking to your family, associates, and friends. Word of mouth is possibly one of the best types of recommendation any type of business can get, particularly online lenders. This will allow you to become confident in their abilities and their services.

IF YOU are looking at property investment or buying a home, always good to use a mortgage broker to help you with your loan.

They do more than half of all Australian mortgages. This is concerning, because mortgage brokers do not exactly come with a good recommendation.

Mortgage brokers have recently been hit with searing criticism from powerful organisations such as the Australian Competition and Consumer Commission (ACCC), the Australian Securities and Investments Commission (ASIC), and the Productivity Commission. Each of them have raised red flags about the way brokers operate.

Mortgage brokers provide their service to us for free. But they do get paid, making money on every loan — often thousands of dollars. The payment comes from the banks who make the loans. So who are their true customers? Who are they really working for? The banks or the borrowers?

ON COMMISSION

When a broker makes a loan, they normally get an upfront payment of just over half a percentage point of the loan amount. If the loan is for $100,000, they get about $500. For a loan of $500,000 they might get about $3000. There are also “trailing commissions” where the broker is paid by the lender every year afterwards, so long as the borrower keeps paying back the loan.

So will the broker get you the best possible deal? You’d hope so, right? But there’s bad news in store.

Let’s ignore the fact that most brokers only deal with a small “panel” of lenders so they can’t actually shop the whole market. Even within their panel they might not screw the price down as much as you want, because it would hurt them to do so.

In a report in 2017 ASIC found that the broker’s commission could be reduced in some cases if the broker negotiated a big discount on the interest rate for the borrower. “This creates a clear conflict of interest,” ASIC said.

CONFLICTED

Brokers have no legal obligation to get you the best possible deal. Their legal obligation is to find you a loan that is “not unsuitable,” whatever that might mean. Given that billions of dollars of upfront commissions and trailing commissions are flowing through the broking industry every year, this conflict of interest is potentially very significant.

Choice, the consumer advocacy organisation, came up with some appalling revelations about mortgage brokers a few years back. They sent mystery shoppers into 15 mortgage brokers to see what happened. They mystery shoppers came back with stories of brokers pushing million-dollar loans onto them, not disclosing commissions, and providing advice that completely failed to meet their needs.

Out of 15 brokers, only one was rated “good”, and seven scored the lowest possible rating, “poor”.

The customers shopped at some of Australia’s biggest mortgage brokers, Aussie Home Loans, Mortgage Choice and Australian Finance Group. It is possible that smaller brokers might be different and it is also possible that mortgage brokers might have improved since the mystery shoppers went in.

BIG FAT MIDDLEMEN

I’m always suspicious of any industry with middlemen. I much prefer to cut out travel agents, for example, and book directly. The mortgage broker is pure middleman and, what’s worse, they’re not even the only middleman. There is usually also another entity, called an “aggregator”, who stands between the broker and the bank. They clip the ticket on the way through as well.

Banks own some of these brokers and aggregators, and when they do, it can skew where the brokers send their loans. For example, Commonwealth Bank owns Aussie Home Loans, and you’ll never guess which bank nearly 40 per cent of home loans brokered by Aussie Home Loans end up with. (It’s Commonwealth, and that 40 per cent is much higher than Commonwealth’s share of the overall market.)

The average mortgage broker makes $130,000 in revenue a year if they are a sole trader, and $86,000 after costs. (This can include brokers working part time.) The average mortgage broking business makes $357,000 and $120,000 after costs. These figures come from a new report by Deloitte Access Economics.

SO WHY DO WE NEED THEM?

While mortgage brokers look to have some concerning conflicts of interest, they would struggle to survive if they were plain bad value. And we haven’t considered the alternative yet! Imagine if your only option was to deal with the Big Four banks instead. Dealing with 1000 slippery snakes might sound hard until you realise your other option is to be eaten by one of four big tigers.

Sure, the Big Four banks compete with each other, but the ACCC finds they don’t compete all that hard.

“The pricing behaviour of each of the Inquiry Banks appears more consistent with ‘accommodating’ a shared interest in avoiding the disruption of mutually beneficial pricing outcomes, rather than consistently vying for market share by offering the lowest interest rates,” the ACCC said in a recent report.

It’s the lack of competition in mortgage lending that permits the mortgage brokers to pop up. And it is possible they’re not nibbling much out of the buyers’ side of the deal. It’s possible the hot, rich, blood-filled vein into which they’ve stuck their fangs is the banks’, not ours.

Brokers might even be doing us a favour by creating a bit more competition. It is far easier for a small non-bank lender to hook up with a bunch of mortgage brokers than to build their own sales network. The Productivity Commission found that brokers were “clearly beneficial for smaller lenders looking to diversify”.

“On average, we calculate that each would have needed to open 118 new branches to generate the equivalent market shares,” the commission wrote.

That extra competition is a big advantage of the existence of brokers, and you don’t necessarily have to use a broker to appreciate it. But brokers do provide benefits to borrowers as well.

The biggest advantage is for people who don’t have the time to shop around at all. If your plan was to walk into your bank and take the first thing they offer, then a broker will likely help you a lot. They are also good if you are not equipped to fill out all the paperwork. Customers report a 90 per cent satisfaction level with mortgage brokers.

Ultimately, the best people to keep mortgage brokers in line is us, their customers. If we ask no questions and take the first thing we get offered, we probably get what we deserve. But if we shop around, stay sceptical, quiz the bastards hard, and negotiate like our life depends on it, we can make mortgage brokers work for us, not just for the banks.

 

LOCAL REAL ESTATE AGENT

PROFESSIONAL MORTGAGE BROKERS IN PERTH

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Finding Re-Finance Information

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Homeowners who are considering re-financing but are not knowledgeable about the subject have a number of options available to them for finding more accurate information regarding the types of re-financing options available as well as the ways to obtain the best available rates and tips for finding a reputable lender. This information can be obtained through a number of resources including published books, Internet websites and conversations with experts in the financial industry who specialize in the area of re-financing. All of these sources can be very helpful but there are also precautions homeowners must take when using each information source. Taking these precautions will help to ensure the homeowner is receiving accurate information.

Using Books for Research

Published books are often considered to be one of the most reliable resources for researching re-financing options. However, not all books on the subject are created useful. Readers may find some books provide a great deal of useful, current information while others books are filled with outdated information and information which is not 100% accurate.

The best way to select a book or books when researching the subject of re-financing is to start the search with books that were only recently published. This is important because the financial industry is continually evolving and as a result books which were published only a few years ago may already be considered out of date.

Homeowners should also seek out independent reviews when considering books on the subject of re-financing. This is important because books which consistently receive solid reviews from consumers are likely to be worthwhile. Conversely books which consistently receive negative reviews are likely to not be worthwhile. Homeowners should seek out highly recommended books while avoiding those that are not highly recommended. This may prevent the homeowner from wasting time reading books which are not informative and may even be inaccurate.

Using the Internet for Research

The Internet is another resource which can be very valuable for homeowners who are considering re-financing their home. The Internet is filled with valuable information but there is also a great deal of misinformation floating around on the Internet. Homeowners who are completely uninformed about the re-financing process may not be able to distinguish between the useful information and the misinformation. As a result these homeowners may be led astray by inaccurate information on the Internet. Homeowners who wish to avoid the potential for this problem should consider verifying the information they find online through an outside source such as a published book from a renowned author or by conferring with an expert in the subject of re-financing.

Homeowners should also do the majority of their research on well established websites. This includes websites owned and operated by major lenders which have been in business for years. The information on these websites is likely to be much more up to date and accurate than websites which are created for profit by website owners.

Consulting with Re-Financing Experts

Finally, consulting with financial experts who specializes in re-financing can be very helpful for homeowners who are considering re-financing. This might be the most expensive option as many of these experts will likely charge a fee for their services but it can also be the most reliable source of information.

There are a number of advantages to consulting with an industry professional as opposed to researching the subject independently through published resources. The most significant advantage is the ability to ask questions throughout the re-financing process. This will help to ensure the homeowner fully understands the available options. It will also help to ensure the homeowner receives the best possible re-financing option for his specific needs. The re-financing process works best when the homeowner offers their input about the type of re-financing they are seeking as well as the benefits they hope to obtain through re-financing. The re-financing expert can than make a better recommendation which will suit the homeowner’s needs.

Whatever your reason for thinking about refinancing your home loan, your ability to do so will depend on a variety of factors, with your amount of available equity being one of the most important.

What is equity, and how much do you have?

Equity is essentially the difference between the current value of your property and the amount you owe on your mortgage principal. To put it another way, the equity in your home is how much of your property that you own for yourself, and not your mortgage lender.

You can find your level of equity using the following basic formula:

Equity = property value – amount owing on your mortgage principal

Keep in mind that your property value isn’t just the price you paid when you bought the place – it also includes any capital gains from making improvements to the property, or from increased demand in your local area.

How can you use your equity to refinance?

There are a few ways that your equity can be used, depending on your refinancing goal. Generally, your equity will play a similar role to that of your deposit when you first took out your home loan – providing security and reducing the lender’s financial risk.

If you’re refinancing your existing loan to lower your interest rate, whether so you can enjoy more affordable mortgage repayments, or so you can pay back your loan’s principal more quickly, the more equity you have available in your mortgage, the more security you’ll offer your lender, and the lower an interest rate you’re likely to receive. You may also qualify for loans with access to useful features such as offset accounts and redraw facilities, which can provide further flexibility and options for managing your finances.

Example:

Jacob considers refinancing his home loan by switching to another lender with a lower interest rate. Because he has more than $120,000 in equity available (the minimum 20% deposit required to avoid paying Lender’s Mortgage Insurance), he qualifies for one of his new lender’s low-interest loans with an offset account and a redraw facility, so he can enjoy greater flexibility from his personal finances.

If you’re refinancing in order to borrow more money, such as when you want to upgrade to a bigger house, the equity in your current home loan can serve as the deposit on a new home loan, with all of the same requirements.

Keep in mind that a new home loan comes with new fees, charges and expenses such as stamp duty, which often average to around 5% of the purchase price. Take this into account when estimating what you may be able to afford.

Example:

Jacob considers selling his current place and buying a new one in a better area, which will require refinancing his mortgage and borrowing more money.

With $300,000 in equity available, and assuming that his new loan will require a minimum 20% deposit to avoid Lender’s Mortgage Insurance (LMI), Jacob could theoretically buy a place worth up to $1.5 million… assuming he can afford the repayments and the costs of refinancing!

To hopefully keep his finances more manageable, Jacob instead looks at homes worth up to $1.2 million, using $240,000 of his equity as a deposit and keeping the remaining $60,000 available to cover the other costs.

It’s also possible to keep your current home loan and property, and to use your equity to fund the purchase an investment property. However, in this case, you likely won’t be able to put all of the equity in your current loan towards taking out a new one – many lenders require you to maintain a minimum Loan to Value Ratio (LVR) in your mortgage to help limit the financial risk involved. You’ll need to take LVR into consideration when determining the amount of usable equity in your home.

Example:

Another option for Jacob is to use the equity in his home to take out a second mortgage to purchase an investment property. Because Jacob’s lender requires that he maintains a minimum LVR of 80%, his property value for determining his usable equity effectively becomes $480,000 ($600,000 – 20%). This in turn means that Jacob’s usable equity is only $180,000, rather than the original $300,000 figure.

Assuming Jacob’s second mortgage requires a 20% deposit to avoid LMI, he could potentially buy an investment property valued at up to $900,000, but it may be more affordable to look at $720,000 properties, using $144,000 as the deposit and keeping $36,000 to cover the other expenses involved.

Another option is to take out a home equity loan, also known as a line of credit, where you borrow money from your lender using the equity in your home loan as collateral. This line of credit could be used to finance a home renovation, to buy a new car, or to pay for a dream holiday.

Much like the previous investment property example, you may be limited on how much you can borrow in a home equity loan, as your lender may require you to keep a certain percentage of your home’s value invested in the property in order to secure the mortgage.

Example:

Another option for Jacob is to use his equity to pay for that big round-the-world trip he’s always wanted to go on. As previously determined, he has $300,000 of equity in his home loan, but only $180,000 of this is usable equity.

By approaching his lender and organising a home equity line of credit, Jacob can set off on his trip, armed with what is effectively a credit card with a $180,000 limit.

ARE YOU THINKING OF RE FINANCING YOUR PROPERTY?

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A Quick Guide To Mortgage And Re Mortgage

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Buying a dream home is one of the major milestones of any individual’s life. The price of real estate is increasing day by day. The designer and flashy homes, which appeal us the most, are beyond the financial capabilities of a lot of individuals. However, this fact should not deter us from fulfilling such a dream. With widely available low interest mortgages, now even a common man can own the residence of his choice.

Starting with the basics, mortgage is a type of loan that any individual can take, in order to buy a home or a property. The property being bought is used as collateral to the loan, this often means that if the repayments schedule of the mortgage is not complied with fully, the lender can take the possession of your property, and sell it to recover his amount.

Any mortgage deal whether it is the first one, or a remortgaging effort, requires a lot of hard work. The best advice given by any lender is cleverly disguised to suit his interest the most. So, the first thing that any borrower should do is to take a closer look at any lender’s advice and compare it with other offers floating in the market.

Choosing the mortgage that is right for you and getting the best deal, involves taking a lot of decisions. The two main things that require the greatest attention are the interest rates charged for the mortgage and the repayment method of the mortgage.

The rate of interest to be paid for mortgages are determined by the base rates prevailing in the loan market. A borrower should go for a low interest mortgage, since the lower the interest rate; the lower will be the monthly repayment. At any given point of time the borrower might get hundreds of offer for mortgage. Each lender has different conditions and charges.  The borrower is advised not to succumb to any offer with cheap initial interest rates; instead he or she should look at all the features of mortgage before accepting any deal.

As for the repayment method the borrower has two options – a repayment mortgage or an interest only mortgage. In a repayment mortgage, the borrower has to pay off the amount in equally spaced instalments. The instalments gradually recover the principal amount coupled with the interest from the borrower. Thus, the mortgage is fully paid by the end of agreed term.

In an interest only mortgage only the interest is charged in the instalments. The principal amount is not included in the monthly repayments. The arrangement to repay the principal amount is made by other means, usually at the end of the mortgage term or as agreed between the two parties. The mortgage amount is guaranteed by some investment in shares, or stock. The borrower has to make sure that his investment grows, so as to pay the mortgage by the end of agreed term.

Most lenders will offer mortgage up to 95% of the property’s value under consideration, but the borrower might have to pay a higher lending charge if he borrows more than 75% of his property value. There are other costs also, which are essentially involved with a mortgage. The lender might ask you to deposit an amount up to 3-10% of the asking price of the property. Valuation fees, solicitor’s fees and higher lending charges also escalate the price of mortgage.

After deciding on a mortgage, the borrower has to apply formally to the lender. He should take care to fill in all the details carefully. If he feels confused at any stage he should take the help of a financial adviser, instead of making wrong assumptions.  If everything goes smoothly the borrower will soon receive a mortgage offer.

Remortgaging means that we are taking a new mortgage to repay an existing one.

As time passes, the appreciation in property rates raises the home equity available at the disposal of the homeowner. Remortgaging utilises this increase in property valuation to get a better deal on debt, or some extra money. Remortgaging does not involve selling or changing homes, but the debt may be transferred from one lender to another.

There are instances, when we require funds for some new construction, such as an extra bathroom, new kitchen, additional bedroom etc. Many times we find that some of our existing borrowings, charge higher rates of interest than those charged by our mortgage lender.  In such cases, we can use the additional home equity available with us to provide funds and ease the repayment burden by remortgaging.

Australia, in recent times has seen a sharp decline in mortgage rates. Therefore, more and more homeowners having existing mortgages are applying for a remortgage to take advantages of the lower rates. Remortgage has become an easy process due to the increasing use of information technology in the lending process. People can now apply online for a remortgage right from the comfort of their home or office.  This has significantly reduced the time and effort for getting a property remortgaged.

Considering the reduced interest rates and easier repayment options, the homeowners often see remortgaging as good source for generating capital. Changing high interest debts into low interest remortgage with easy repayment terms is often, quite lucrative for the debtors. By changing their debt type they can significantly reduce the repayment burden.

There are many lenders in the Australian market, which provide competitive remortgage offers. Since, remortgages are used to move debts; it should be seriously considered that the cost of moving debts should not offset the savings in any such process.

The redemption fees, is the biggest cost to be incurred while taking a remortgage. A redemption fee is what a person has to pay when he ends an existing mortgage contract and applies for a remortgage. There are early redemption penalties, which escalate the overall costs of remortgage. These penalties are the largest when the debt is still new. Generally, remortgaging is not advised when such penalties are very high, but if you have a particularly good offer, which offsets the loss due to the early redemption penalty, you should consider it.

In addition to the redemption fee, there are many other costs involved with remortgaging. Some of which are discussed below:

  • The new lender who will provide the debt will like to reassess the value of your property to make sure that it is not a risky deal for him. So, he might charge some valuation fees for this process.
  • The entire remortgaging process has a legal angle attached to it. This might involve legal consultation fees. In addition to these, the lender might include the conveyance and other office charges.

The debtor should consider these fees while remortgaging. Options are available, where the lender might refund all or a part of the valuation, legal and office charges to the debtors, if the repayment schedule is exceptional. Be sure to ask your lender about such an option.

Remortgaging does provide funds with low interest and easy repayment options, but there are many drawbacks associated with it.

The debt repayment process again starts from the scratch. Short term savings might lead to a long term financial liability. The interests although relatively lower now must be paid over a longer period of time, and again the fact to be kept in mind is that any serious default in payments might lead to repossession.

 

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Knowing When You Are Ready To Buy

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All across Australia, there are millions of people looking to a buy home – either now or in the future. Over the last few years, lower interest rates have come along, making it more affordable than ever to buy a home. When most people stop and give it some thought – buying a home makes a lot more sense than renting a home or an apartment.

In order to buy a house, you’ll need to start saving your money and have enough for the closing costs and a down payment.  You should always best try to have 20% to put down as your down payment. If you aren’t able to put 20% down, you’ll need to buy some private mortgage insurance, which will cost you more in terms of your monthly payment.

In most cases, the closing costs will run you around 5% of the property price. Before you purchase the home, you should always get an estimate. An estimate won’t be the exact price, although it will be really close. You should always plan to save up a bit more money than you need, just to be on the safe side. It’s always best to have more than enough than not enough.

You’ll know your ready to buy a home when you know exactly how much you can afford, and you’re willing to stick with your plan. When you buy a home and get your monthly mortgage payment, it shouldn’t be any more than 25% of your total monthly income. Although there are lenders out there who will say that you can afford to pay more, you should never let them talk you into doing so – but stick to your budget instead.

Keep in mind that there is always more money involved with a home other than the mortgage payment. You also have to pay for utilities, homeowners insurance, property taxes, and maintenance. Owning and caring for a home requires a lot of responsibility. If you’ve never owned a home before, it can take a bit of time to get used to.

Before you fill out any applications, you should always look over your credit report and check for any errors. Although you may think you don’t, you can easily get an error on your credit report and not even realize it.  If you check your credit report early enough, you may leave yourself enough time to fix any problems and get your credit back on track. Rebuilding credit can take time though, sometimes even years. You should always plan ahead – and give yourself plenty of time to fix your credit.