Cant Find What You're Looking For?

If the topics you are hoping to read are not appearing here, let me know whats missing!

What You Need to Know About Tax & Your Investment Property

When it comes to property investments and tax there are 3 main things to be aware of:

* Negative gearing.
* Tax deductions.
* capital gains tax.

Negative Gearing

Negative gearing is when the annual cost of your investment is more than your return. Basically, when the cost of maintaining your property and paying the interest on your loan is more than the rental income you get from it, you are negatively geared.

When this happens the government allows you to deduct the costs of your property from your gross income. So say your income is $60,000 a year but your property costs you $15,000 a year, you’ll only need to pay income tax on $45,000.

This way you’ll pay less tax, but don’t be mistaken, it is still a loss -just a smaller one – that hopefully will be more than made up for by the property’s increasing value. You probably won’t see a return on your investment until you sell the property, and only if it’s for a much better price than you originally bought it for.

Tax Deductions

Whether you are negatively geared, or getting a positive income stream from your property, you can claim expenses relating to your rental property for the period your property was available for rent.

All the following expenses can be claimed:

* Advertising for tenants, agents fees and commission.
* Interest payments and loan fees.
* Council rates, land tax and strata fees.
* Depreciation of items such as stoves, fridges and furniture.
* Repairs, maintenance, pest control and gardening.
* Building and landlords insurance.
* Stationery, phone costs and any travel to inspect the property.

The above is not a full list of what you can claim. Get proper advice from a tax expert before putting in your return.

Capital Gains Tax

What the Government gives with one hand, it takes with the other. Capital gains tax is a tax on the profit you’ve made on the property. So it’s based on the difference between what you sell it for and what it cost you (the purchase price plus anything you have spent on capital improvements or renovations).

Definitely get advice on what you might be up for when considering selling your investment property.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.
0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Home Loans Joondalup

Christmas Present Or January Sales? When Is The Best Time To Buy Property?

There are just under eight weeks to go until Christmas – even less time until the frivolity of the holiday season is upon us. It’s a lively time of hectic personal, social and business commitments, followed by a period of relative down-time. So what if you’re in the market for a new home – should you buy before Christmas or put it off until next year?

Whether it’s gift-giving, taking a holiday or entertainment expenses, the festive period can put a strain on the budget. According to Credit and Charge Card Statistics reported monthly by the Reserve Bank, Australians owe more than $44.9 billion in credit card debt, and our credit card purchases in December are at least 15 per cent higher than the average monthly purchases throughout the rest of the year. With many economists predicting more than one interest rate rise in the next few months, house-hunters need to plan their finances very carefully.

But while it’s an expensive time of year, there’s also opportunity to snap up a pre-Christmas property bargain.

“It is a really good time for purchasers to be picking up a good buy, pre-Christmas,” says Georgi Coward, Real Estate Agent with Cunninghams Property. Coward explains that in December, homes on the market are those leftover from spring, which may not have been priced appropriately. “Vendors realise at this stage that it hasn’t sold and that they’ll now be waiting an extra, longer time.”

“A lot of buyers disappear as well, so there are just the really keen ones that are out there,” says Coward. “They’re often the ones that will pick up a bargain, as vendors are more negotiable, and there’s a little bit more desperation to sell, move on and enjoy Christmas.”

As for property values, there are indications that prices will only go up from here. “Overall we’re finding that buyers are very confident about the direction of the market and most agree that 2010 will see between five to ten per cent price growth across the board,” says John McGrath, CEO of McGrath Estate Agents. “Serious buyers have been looking to get set in the market for the last three months.”

McGrath says that interest rate rises will have an impact on anticipated price growth “only if we see a two per cent hike in the next nine months, which is unlikely.” He says, “Most buyers have factored in another one per cent in their thinking and are happy to buy with that in mind.”

But buying next year has its benefits too. “January can be a good time to be buying with leftover stock that hasn’t sold prior to Christmas,” says Coward. Holding off also gives you a little more financial breathing space over the holiday season, and the chance to pounce on the fresh New Year stock as it comes onto the market – while other buyers are taking holidays.

“There’s an opportunity that you can jump on it before anybody else, and before it hits the papers,” says Coward. “But you may end up paying a premium to take it off the market.”

If your home is, or will be on the market before you buy, these considerations apply to you as a vendor as well, not to mention the need to time both your transactions optimally. So, whether ‘tis the season for a sale or not, ultimately depends on your circumstances and needs. And your Christmas wish list.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.
0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Home Loans Joondalup

Is Joondalup One of Australia's Hottest Suburbs?

November's Australian Property Investor magazine cover is branded with The Annual HOT 100 Australian Hotspots. The cover story focuses on research by Peter Koulizos from TAFE SA, Cameron Kusher, senior research analyst from RP Data and Terry Ryder of hotspotting.com.au. 100 suburbs Australia wide are listed alphabetically, each representing one of the hottest suburbs in the country for investment. Joondalup is one of only 8 suburbs in Perth picked as 'hot'.

The article reads:
The Perth suburb of Joondalup is the kind of market Terry Ryder expects will prosper in the next phase of the property market."We've been through a period in the bottom end has been the most active sector and next will be the trade-up buyers seeking homes in price ranges one tier above the first homebuyer market," Ryder predicts.

"Joondalup City includes a cluster of suburbs with median house prices in the $300,000's and $400,000's. These suburbs have a pleasant environment between Lake Joondalup and the ocean, one of the most impressive CBDs anywhere in Australia - with extensive shopping, education, transport, medical and admin services. The transport interchange links train and bus services ad is integrated with a regional shopping centre. The big kicker for Joondalup is the State Government decision to name it the 'primary centre' for northern Perth in the Directions 2031 plan, which means government spending will be specifically targeted on this centre."

Most of us have already discovered the City of Joondalup is a great place to live and above is a pretty compelling article in favour of it also being a great place to invest. With rates still low and rental returns still impressive, now may be the best time for you to get into the investment market - right here in your own neighbourhood! Speak to a mortgage expert to find out what your options are and get a written pre-approval for additional security and negotiating power.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.
0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Home Loans Joondalup

How to Find Your Ideal Investment Property

It’s a little easier to be rational about buying an investment property than buying a home. Since you don’t plan to live in it, you can inspect places with a more business-like eye

The Location

If you’re looking for a place with potential for capital growth, the experts reckon you should aim for place close to the CBD, because scarcity and demand will ultimately push the prices up.

If you’re looking for a good rental return and a steady cash flow consider buying in the suburbs or regional centres. Prices in these areas are cheaper so you’ll get a better rental yield.

Whatever the investment strategy you follow, there are some general things to keep in mind when deciding where to buy:

• Try to avoid places on busy roads or directly under flight paths.
• Waterside suburbs appeal to both renters and future buyers and they tend to at least hold their value.
• You don’t have to buy somewhere close to where you live.

Unsurprisingly, making a successful investment in property means buying the right place, at the right price, at the right time. So when you’ve narrowed down the locations you’re interested in, research the state of the property market in those areas. Keep an eye on vacancy rates, sales prices and rental rates. Look at the interest in the area, the current population growth and the projected population growth.

There are lots of websites out there to help you keep up to date with property market statistics. Send me an email and I will gladly add you to our regular property market update.

The Type of Property

Residential? Commercial? Or even a holiday rental? There are many of types of property to consider, but most Australians opt to invest in residential property because that’s the type they know best.

If you decide to go residential you’ll need to decide between a unit or house.

The plus points with a unit include:

• They tend to be cheaper and therefore provide a higher yield.
• The upkeep is managed by a strata company and if things go wrong the cost is split between all the strata owners.
• If you do decide to purchase a unit make sure you check the strata fees and council rates when doing the sums.

If you invest in a house:

• The extra land value can provide a greater chance for capital growth.
• There is good chance of finding a tenant as there are lots of families interested in having some extra room for the kids.

If you do decide to buy a house, be aware it can be a pain to maintain.

The Features Tenants Look For

When looking at a property, put yourself in the shoes of your potential tenants. Think about what sort of people the place will appeal to most. The sorts of things a family will look for will be quite different to what a professional couple will be interested in.

For example, a family is likely to be interested in things like the property’s proximity to schools and the quality of its kitchen, while a professional couple might want to know about nearby cafes and the distance to a convenience store.

Some features will appeal across the board. Look out for places with balconies, internal laundries and parking.

To find out what is popular in the area you are looking at, talk to local rental agents and ask them about the types of properties in demand.

Past History

Before you enter into negotiations for any place, find out if it was rented in the past: how much it was rented for, if there were any vacancy periods, how long it was vacant for, and why.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.

0403 144 822

(08) 9300 0686

michael.cormack@aussie.com.au

Mike Cormack

Aussie Home Loans Joondalup

Get a Return On Your Investment

Historically, property has always increased in value. While there may be dips and plateaus, if you’re in it for the long-term, property is generally considered a pretty safe option. Not only do you have the potential capital growth to look forward to, you can also get a steady stream of rental income from the moment you rent the place out.

The thing is, strong capital growth doesn’t often come hand in hand with high rental returns, and vice versa. That’s because the more expensive the property the less the return tends to be. The properties most likely to have strong capital growth are in sought after, but pricey, inner city and beachside areas. While properties with a higher rental return are generally found in the cheaper regional and suburban areas.

For example: a 2 bedroom inner city unit might cost $650,000 to buy, but attract a rent of around $550 per week - a return of about 4% a year. While a 2 bedroom unit in the suburbs might cost only $300,000 but will get tenants paying $400 per week - a yearly return of around 6.5%.

So you should decide on your investment strategy before you even start searching for a property.

A CAPITAL GROWTH STRATEGY

Capital growth can give you the big wins in the long term. Some property investors have doubled their money after only a few years of ownership.

At the same time other investors have over-extended themselves and been forced to sell at a loss. Nothing is a sure thing.

Do the sums carefully. If you have high loan repayments you may see little return or even a loss for a few years. For some investors this is not a problem because they count on:

• The short term losses being greatly exceeded by the long term gains.
• the tax relief that comes with negative gearing.

Negative gearing is when the annual cost of your investment is more than your return. The Government offers you some tax breaks when this happens. To find out more go to tTax and your investment property.

A RENTAL INCOME STRATEGY

Opting for a strong steady stream of rental income doesn’t mean forgoing capital gains altogether – it just means your profit when you sell might not be as great as it might be for a different type of property.

A rental income strategy can work well if you don’t have to borrow heavily and keep your repayments low. It’s sometimes called positive gearing - so unlike negative gearing you won’t “lose” each week after paying all the outgoings.

Again you need to do the sums when deciding on your property and the price you’ll pay for it. The experts talk about the property’s “yield” as a measure of its return. Very simply it’s the percentage of the annual rent a property generates calculated against its purchase price.

To best work-out your actual return you need to calculate the money in your bank account after all costs and taxes are sorted.

THE COSTS

When deciding your investment strategy and what you can afford to spend, you should also consider the potential costs of ownership:

• Interest repayments - if you get a variable loan, factor in higher repayments if rates go up.
• Council rates and strata fees – the agent will tell you what these are per quarter but if you’re buying an apartment get a strata search so you’ll know if there are any big special levies in the pipeline.
• Repairs – if it’s a house you’ll be up for all the building repairs, but even in a strata block you’ll be responsible for repairs to fixtures and fittings and any whitegoods and appliances you include with the flat.
• Management fees – if you have the time and the inclination you can manage the property yourself, but if you get a managing agent count on paying around 5% of the rent.
• Insurance costs – if you purchase a house you’ll have to pay building insurance. It’s also a good idea to get landlords insurance which covers:
  • Any damage done by a tenant.
  • Your legal liability if a tenant injures them-self.
  • Lost rental income if your tenant moves out without paying.

When doing the sums, factor in rent-free/tenant-free periods. The experts say at least 4 weeks a year is a good rule of thumb.

CONSIDER THE RISK

Like with any investment there is no guarantee that you will get a return. Property prices can drop and, good tenants can be hard to find. Do as much research as you can before deciding if property is the best place for your savings.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.

0403 144 822

(08) 9300 0686

michael.cormack@aussie.com.au

Mike Cormack

Aussie Home Loans Joondalup

Top 5 Reasons Borrowers Are Rejected

Online lender MyRate.com.au has undertaken qualitative research to discover the top five reasons would-be borrowers have their applications rejected. The study was brought about in order to better educate those considering a home loan.

MyRate.com.au Managing Director Kevin Sherman explains. “Lending criteria have become a lot stricter in the past 12 months and people can benefit from understanding how these changes will affect their chances of securing a home loan. The recent turmoil brought about by the GFC coupled with deflating property prices and an increasing unemployment rate has seen all lenders change their risk appetite. As such, it is now a lot tougher to qualify for a home loan.

Top 5 reasons based on the MyRate.com.au analysis:

1. The borrower cannot demonstrate they have saved a genuine 5% deposit“These days I’d go so far as to say it’s impossible to get a loan without at least a 5% deposit” says Sherman. “This is a significant change, as a few years ago consumers didn’t even need a deposit for some loans.”

2. The borrower has servicing issues - for example, they do not have a steady income or are still on work probation“This is a concerning factor for borrowers with a new job,” said Sherman. “The problem lies in that many employers are now extending probationary work periods from the usual three months to six months. Their reasoning: there is so much quality talent looking for jobs that employers are ‘playing it safe’ just in case an employee doesn’t work out or in case the business needs to lay staff off. This means that people are having to wait longer to secure a loan.”

3. The borrower cannot supply enough funds to cover at least a 10% deposit for new purchases, or 15% of the property value for refinances“Deflating property prices in the current climate and a softer estimate for future growth means that lenders now want their borrowers to put up more of the money themselves in order to reduce the risk to the lender. It isn’t uncommon for lenders to now demand a 15% deposit in some situations,” explains Sherman.

4. There are issues with the property that they wish to buySherman explains “There are certain types of properties that lenders might now consider ‘unsuitable’. This could be because the apartment you want to buy is in a giant complex of similar flats which makes the lender concerned it will be hard to sell should they need to. A property may be a little run down or be valued at a lower price than expected, which may affect the loan amount the lender will agree to.”
5. There are issues with the borrower credit file“It could be that you have been shopping around for finance and, as such, your credit file is showing too much activity - something which is viewed by lenders as a negative as they may think you were denied finance by various providers. It could be an unpaid Telco bill. Basically, anything that may raise suspicion will be closely scrutinised and assessed for risk.”

“The bottom line is that lending policies have tightened significantly. Banks and lenders are more cautious than ever before, with most looking for a better quality borrower. The best thing you can do for yourself is to be organised and over-prepared - you’ll come across as a great candidate if you can demonstrate your ability to repay to the best of your ability.”

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.

0403 144 822

(08) 9300 0686

michael.cormack@aussie.com.au

Mike Cormack

Aussie Home Loans Joondalup

How To Get A Home Loan That Won't Send You Broke

How much can you borrow?
It might be stating the bleeding obvious but the most important thing to do, before you start house hunting, is work out exactly how much you have to spend and how much you can afford to borrow. That means taking a good look at your income, financial commitments and savings. It also means getting pre-approval on a home loan.

The amount you can borrow depends on:

Your income

Unsurprisingly your income is the most important factor determining the amount you can afford to borrow. It needs to comfortably cover the repayments on your loan. Most experts say “comfortably“ means repayments are no more than 30% of your gross salary.

You should also take into account other general home-owner costs like repairs, council rates, insurance and strata fees. When you combine these home-owner bills with the amount of your repayments, the annual amount should not exceed more than 40% of your gross salary.

Your financial commitments

As well as your income, lenders will look at your current financial commitments to calculate what you can afford to pay. They’ll take into account things like credit card and HECS debt.

Your deposit and savings

If you’re buying your first home, you’ll need to have some savings to use as a deposit. At least 5% of the cost of the property you want to buy is a start, but to avoid Lender Mortgage Insurance (LMI) you’ll need over 20%.

A good savings history will also help you get a loan, but it’s not essential. Lenders are interested in your ability to pay the loan now and in the future, rather than what you earned and spent in the past. If you’ve already got a home and a mortgage, a savings history is not important.

Be prepared for:

Possible rate rises

You should be prepared for interest rates rises when you estimate how much you can afford to borrow—even if you don’t get a variable loan. Most lenders will calculate a possible interest rate rise of up to 2% above the current official rate when deciding how much you can borrow.

If you can, pay that extra 2% anyway. Then you’ll hardly feel it if interest rates go up. If they don’t go up, you’ll have cut years and thousands of dollars off your loan.

Extra costs that come with a property purchase

Initial costs that you need to budget for when buying a home include loan Application fees, Building inspection fees, mortgage insurance, Stamp duty, Conveyancing fees and more. For a rundown on the extra costs you may have to pay go to extra costs.

Don't guess what you can afford!

Get pre-approval on your loan

Don’t make the mistake of only using a few online calculators to guesstimate the amount you can borrow. We’ve seen too many people lose a deposit because they’ve exchanged at an auction and then found out they couldn’t get a loan to cover the cost of the property.

Get pre-approval before you start the home hunt. You’ll save loads of time and stress.

Don’t over-stretch yourself

You might think that you can afford to spend more than 40% of your gross salary on your home every year, but you’re unlikely to convince a lender. Even if you think you can live on baked beans and commercial television for the next ten years—most lenders won’t agree. They know everyone wants some Thai takeaway, a good DVD and a big night out every now and then.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.
0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Home Loans Joondalup

Australian Property Selling Fast: Are We Moving To A Seller's Market?

Whoosh! There goes that unit you had set your heart on! The speed with which properties are selling is increasing, reflecting the return of consumer confidence. According to figures from Australian Property Monitors, the average number of days on the market of a Sydney unit has dropped by 19 per cent in the months from March to June. That’s just 68 days.

And the trend is pretty much across the board with both units and houses in every capital city hanging around the market for a much shorter timeframe. If you look at the average days on the market for both units and houses then there has been a 15 per cent drop in the length of time they are on the market in Sydney, 11 per cent in Melbourne and 10 per cent in Brisbane.

Back in March properties, houses and units could be on the market for three or four months and there was little pressure for buyers to rush. But now it’s turning into a sellers market and demand is outstripping supply in most sectors of the market. Even the reality TV show Selling Houses Australia is touting for properties that are on the market more than three months without selling, perhaps reflecting that few are hanging around for that length of time.

Of course just because it is currently a seller’s market that doesn’t mean you have to buy just any old property because you fear you will miss out altogether. Matthew Bell, economist at APM says there will always be other properties to buy within your budget. Never forget that buying property is most likely the biggest investment you will make in your life so you need to be sensible and not let your heart rule your head.

Bell suggests that you work out the maximum price you are willing to pay and stick to it; research the property you are considering; and don’t overpay simply to get in now. As he cautions: “It will cost you more in the end if you have to exit the investment because you can’t afford the repayments."

And there should always be time to do thorough research. While some properties may be snapped up in the day, the overall trend is still closer to the two-month mark. But in a bid to beat other buyers to a property, buying agent Patrick Bright of EPS Property Search suggests you do the groundwork first so that when you find a property, you can act quickly. “Get your finances pre-approved, select your solicitor to check the contract and get the name of the firm to do your pest or building inspections all beforehand,” says Bright.

While it is currently a seller’s market, the flood of property that traditionally comes up for sale in the spring could see the imbalance shift back towards more sellers than buyers. As a result Bright suggests that if you are upgrading, then now might well be the best time to sell while there is still a dearth of properties around which should translate to a speedier sale and a better price.

But not everybody agrees. Bell says APM does not see the market heading south going forward even after the removal of the first home owners’ bonus so there is no reason to sell just to take advantage of recent median price increases. Real estate is a very segmented market. For instance, first homes (mostly units) are going gangbusters with the first home owners grant bonus still a drawcard while some properties at the top end of the market are struggling a little more.

Indeed Cameron Kucher of RP Data says with the exception of the first home market, it is still more of a buyer’s market. But whether your particular segment is a buyer’s or a seller’s market, make sure you do your homework before you buy or sell.

Key Points

• Sale times have dropped, Sydney units for example by 19 per cent


• Be prepared: organise finance, solicitor and pest inspections


• Don’t overpay just to get into the market

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.
0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Home Loans Joondalup

Tips for Buying or Building Your First Home

The extension of the Federal Government’s first home buyer’s grant to September 30 has been a boon for those looking to enter the property market for the first time. The $21,000 grant only applies to people aged over 18 years of age and those who are buying a new home, while first home buyers who acquire an existing home get $14,000. First home buyers need to enter into a contract to purchase an existing home or buy “off the plan” by the end of September to be eligible for the grant.

The grant has been a blessing for young Australians keen to fulfil a dream of building their own home, while providing a much-needed boost to the construction industry. However there are traps for young people jumping into the market without the discipline of saving and having a financial buffer to cover their mortgages if they lose their jobs after settlement.

Buyers need to be conscious of the traps in buying a new home, especially as the economy appears to be under pressure. As a direct result of the Global Financial Crisis, the Reserve Bank of Australia has slashed interest rates to historic lows to stimulate our economy. And as the world recovers, it’s guaranteed that rates will rise again and buyers need to budget for this. And more now than ever, buyers need to do their homework before committing to a property.

There are still good deals to be had, but extra caution is needed in selecting the right property as the first home buyer’s grant has created a price bubble in some areas. There’s no point paying $20,000 or $30,000 over market value just to get $14,000!

The first step in the process of building your home should be to arrange provisional finance and get expert advice from Aussie before entering into a contract for a first home construction. Buyers need to be aware of their financial limits and commitments during the construction period and following completion. It is worth bearing in mind that many lenders in Australia are reluctant to provide finance to owner-builders, and loans are usually restricted to the construction period.

Buying a property is usually the biggest investment decision you will ever make, and the stakes are high if mistakes are made. But with careful planning and research, buying a property can be very rewarding for both your bank balance and lifestyle.

Here are some important tips I have learnt to help avoid the most common traps:

1. Work out how much you can afford to spend before you even look, and only look at apartments or homes clearly advertised within that price range. Do not waste your energy looking in the wrong suburb – because you may end up biting off more than you can chew.
2. Look at as many properties as possible in your price range to get an idea of what you can afford. Check with Aussie’s skilled mortgage advisers to work out what loan product suits your needs – especially your borrowing limit!
3. When working out the best home loan for you, check the ongoing payments, especially in the fine print for monthly service fees and other charges.
4. If you are worried about interest rate rises, you can split your loan between variable and fixed rates and take an “each-way” bet.
5. Make fortnightly payments, not monthly, so the interest on your mortgage does not add up.
6. Remember a low start-up interest rate, or honeymoon rate loan does not mean you will be paying less for your property in the long term.
7. Make absolutely sure your home loan repayments do not overly impact on your lifestyle. You do not want to only eat baked beans for dinner for the next 25 years.
8. Be prepared for the monthly repayments to rise and fall during the life of your loan. Make sure there is some financial room to move if rates rise. If rates fall keep paying the same amount each month or fortnight, so you pay off your loan quicker by eating into the principal owing.
9. The best step you can take in the search for your first place is get pre-approval for a loan, which Aussie and some other lenders can provide, so you know exactly what you can afford.

Buying a property is one of the most exciting and financial things you can do in your life, so try and enjoy it. The better your research and preparation, the greater your enjoyment … and financial rewards.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.
0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Joondalup

Fixed or Variable Rate - Why Not Have Both?

Annoyed that you may have missed the opportunity to take out a fixed mortgage with rates set to move higher? Well, why not create your own?
It’s not such a crazy idea. You can simply turn your current variable home loan into a pseudo fixed loan by raising your repayments to match the current fixed term loan amount. And by doing so, you will not only be more likely to pay off your mortgage faster but at the same time you can enjoy all the flexibility a variable loan can offer.
So how do you go about it? In the first instance find out what the current repayments would be for a fixed loan. According to ratings house Canstar Cannex, the current average three year fixed rate of 6.94 per cent on a loan of $250,000 means a monthly payment of $1757.39. The average fixed rate for a five-year fixed loan is 7.65 per cent requiring a monthly repayment of $1871.94 on a $250,000 loan.
These repayments compare with $1552.80 a month on a current average variable rate of 5.62 per cent so by adopting this strategy you will either pay an extra $204.82 (with a three year fixed) or an extra $319.14 (with a five year fixed) a month.
If you choose to pay the equivalent of a three year fixed rate then assuming all things were to stay the same (which they are unlikely to do in reality) then you would save $52,398 in interest and pay off a 25 year loan five years and five months faster.
Clearly with the Reserve Bank governor Glenn Stevens current take on the outlook for rates, the variable is not going to stay the same, whereas for example the three year term of a fixed loan guarantees you that the rate will remain the same. Stevens recently hinted again that rates would probably start to rise again before Christmas.
But since the variable rate probably won’t jump 1.3 per cent in one hit (the difference between the standard variable and the three year fixed), there will still be some room to benefit for a few months yet. Indeed, the longer the average variable rate stays below the current fixed rate of 6.94 per cent, the better off you will be.
And the other good news is that you can maintain all the flexibility that traditionally comes with a standard variable loan – lump sum repayments, redraw facility and the ability to split your loan.
Peter Arnold of Canstar Cannex says: “You may well come out on top as long as the variable does not shoot up too quickly. While you may end up paying more after 18 months, by making the extra payments on your variable home loan that money is going towards paying off your principal. If you just had a fixed loan, this may not be the case.”
So having a do-it-yourself fixed interest loan through your variable is a bit like the old Claytons joke. It’s the fixed interest loan you have when you’re not having a fixed interest loan!
Key points:

• Repayments on variable loans are currently lower


• Use the difference to pay off your principal


• Reduce your loan term by years by paying off your loan faster


• Retain the flexibility of a variable loan

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.
0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Joondalup

RBA Meeting July 2009: Interest Rates Left Unchanged at 3.00%

www.ratedetective.com.au
At its meeting today, the Reserve Bank of Australia decided to leave the cash rate unchanged at 3.00 per cent.
Press release following the decission looks identical to June press release:

• global economy is stabilising,


• growth in China has strengthened considerably,


• US economy is approaching a turning point,


• but conditions in Europe are still weakening

In Australia monetary policy has been eased significantly by:

• Weaker demand for labour = lower growth in labour costs


• A pick-up in housing credit demand = stronger dwelling activity


• House prices are tending to rise


• Business borrowing has been declining


• Mortgage rates are at very low levels by historical standards


• Business loan rates are below average.

The Board's current view is that the outlook for inflation allows some scope for further easing of monetary policy, if needed and thus the Board will continue to monitor economic and financial conditions.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.

0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Joondalup

Property Investors Return to The Market

www.news.com.au

Real Estate group Ray White says investors are returning to the property market after its sales for June rose by 33 per cent from the same month last year.
Australasia's largest real estate company also forecast continue sales growth in the second half of calendar 2009 on the back of improved investor confidence.
Group sales for June rose to $2.411 billion, from $1.8 billion in the corresponding month in 2008.
"Despite months of negative reports on the economic downturn and the global recession, I think investors in Australia are starting to realise it's not the end of the world and they are regaining confidence,'' Ray White Deputy Chariman Sam White said.
"They're also starting to see that property investment has a lower level of risk when you compare it with the volatile sharemarket.
"Despite a small decline in the real estate market since early 2008, it is still actually performing quite well nationwide.''
Ray White's figures show property sales in all states grew in the double digits from a year ago, with New South Wales a stand out with sales growth of more than 40 per cent following a lift in high-end property sales.

Mr White said the combination of low interest rates, softer property prices, a shortage of housing stock and strong rental demand was attracting investors.
"They are returning to the market and should continue to do so over the second half of the year, particularly in fringe areas within commuting distance of the major capital cities,'' he added.
Ray White sales in Queensland grew by 27 per cent in June from a year ago. South Australia and Northern Territory sales were up 25 per cent while Victoria and Western Australia sales were both up 23 per cent.

Fixed vs Variable Choice Gets Tougher

www.smh.com.au

Fixed interest rates continue to edge up as the world economic outlook improves, official interest rates rise in the US and expectations firm of further rate rises in Australia.

The best 3-year rates currently range from 6.70 to 6.99 per cent but the number of rates below 7 per cent is dwindling. This compares with the bank standard variable rate of 7.07 per cent and an overall market-average standard variable rate of 6.80 per cent. The best four and five-year rates start around 7 per cent with quite a few up to 7.20 per cent.

The bulk of one-year rates are currently between 6.6 and 7.0 per cent. The best two-year rates range from 6.69 up to 7 per cent. The fixed rates currently on offer are not nearly as attractive as they have been last year and earlier this year. But if official interest rates move up as many expect over the next 12 months, the best fixed rates locked into now may then look quite good.

The current choice between fixed and variable will depend on a borrower's circumstances but fixing at least part of your loan now below 7 per cent may be a good option for some borrowers. Some of the issues to consider are outlined below.

There is high competition in fixed rates these days which means there is significant variation in the market. It certainly pays to shop around with up to 1 whole percentage point difference at any one time between rates for a given fixed period. Consider bank, non-bank and credit union loans.

Does fixing really suit?

It's important to consider that fixed rate loans won't suit many borrowers. The cheapest home loan is not necessarily the one with the lowest rate, it's the one that allows you to pay it off soonest. The restrictions on extra repayments and early payout attached to fixed rate loans can make them very expensive in the long run. Every extra dollar paid off the loan early on saves $2 in interest by the end.

There is also the cost of switching to consider - charges vary but they can outweigh any savings on the rate.

Above all, remember fixed rates are always a gamble, especially over the longer terms of three to five years. You are committing to an interest rate for a period far beyond anyone's ability to predict rate movements. Trying to pick whether fixed or variable rate borrowers are going to come out ahead over this time period is always a matter of chance. A decision to fix should be considered as insurance against variable rises that might extend repayments beyond the limit of your finances.

So for those who value the certainty of knowing just what their repayments are going to be over the next couple of years, it may well be better to lock in now. Property investors and owner-occupiers on a tight budget, for example. And for those borrowers not in a position to make extra repayments or not likely to pay out their loan during the fixed term, fixed rates can be attractive.

A good alternative for many will be to fix part of your borrowings and keep the rest on a variable rate. But weigh up the costs of switching to this or any fixed arrangement with what you might save in interest.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.

0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Joondalup

Searching For Your Dream Home Online? Google Real Estate!

Everyone uses the internet to search for property information, right? Whether you are looking for your next home or investment property, researching suburbs or just want to find out how much your neighbour is trying to sell their house for, the internet is the easiest and most convenient way to do it. It seems this fact has not gone unnoticed at the Google HQ.

This month Google released Google Real Estate Australia and NZ. They now provide current property listings with information collected from many third party websites. You can use Google's powerful search engine to customise your search with specific criteria like number of bedrooms or bathrooms, price and suburb. Using Google's famous 'Maps', they indicate properties for sale or rent with a 'marker'. Clicking on the marker will provide the searcher with some useful information and a link to the agents site to view the property in detail.

The feature also allows independent sellers to list their properties for free, so long as they are shown on a website. “People can upload a feed of all of their properties and they can do that one or more times a day to keep the information up to date,” Google spokesmane Andrew Foster said. “With cities like Perth being so remote from the eastern seaboard, this kind of technology will be an advance for interstate investors who can do their research and go on virtual tours that they might have not seen.”

Check it out right here.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.

0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Joondalup

Premier Announces Joondalup will be a Tourism Precinct

http://www.joondalup.wa.gov.au/
3/07/2009
The City of Joondalup has welcomed Premier Colin Barnett’s announcement in Parliament on Wednesday (June17) that the Joondalup City Centre will be granted tourism precinct status later this year.
Joondalup Mayor Troy Pickard has welcomed Premier Colin Barnett’s announcement in Parliament on Wednesday (June17) that the Joondalup City Centre will be granted tourism precinct status later this year.
Mayor Pickard said the announcement was a fantastic result for the City of Joondalup after the Council had persistently lobbied the current and former State Government since 2007 for tourism precinct status.
“There will be huge benefits for Joondalup as a result of this tourism precinct designation,” he said.
“A 2007 City survey of businesses in the Joondalup City Centre highlighted overwhelming support for the area becoming a tourism precinct.
“Becoming a tourism precinct will not only allow trading hours similar to those in Fremantle and Perth for our local Joondalup businesses, it will also reinforce Joondalup’s standing as a significant centre within the metropolitan area.
“This will strengthen the Joondalup precinct as a sustainable tourism hub, improving visitor experiences and opportunities, and will bring economic and community benefits like increased employment opportunities and greater choice.
“As a tourism precinct, the City will have significant opportunities to brand and market itself as a quality destination of choice, improving on our many existing attractions like Lakeside Joondalup Shopping City, the multi-award winning Joondalup Resort and Hillarys Marina, the second most visited tourism venue in WA.
“The precinct status will also give local businesses more opportunities to open and our residents, visitors and students the freedom to choose when they want to shop in the Joondalup City Centre.
“It will create a more vibrant and exciting City and will encourage and attract a variety of businesses and visitors to the North West region of Perth.
“The City’s extensive transport networks, accommodation, shopping and some of the best bushland, wetland and coastal natural areas in the metropolitan area, indisputably brand Joondalup as a major WA tourism precinct and it is exciting the Government has decided to officially recognise this.
“Becoming a tourism precinct will greatly complement the large number of events, concerts and festivals held in the Joondalup City Centre and will help assist Joondalup become an even more vibrant and bustling place to visit."

0403 144 822

michael.cormack@aussie.com.au

Mike Cormack

Aussie Joondalup

First home buyers: time to make your move

If you are considering becoming a first home buyer, there has never been a better time. The federal government has recently increased the First Home Owners Grant up to a very helpful $21,000 for eligible purchases. Adding to that large Stamp Duty discounts, interest rates dropping, a reduction is real estate sale prices plus home loan products available exclusively for first home buyers means the time to act must certainly be now.

If you needed any more incentive, the federal government has placed an expiration date of 30 September 2009 on their First Home Owner Grant Boost. This means if you haven't signed a contract to purchase a home or build a new property before the cut-off date, you will only be eligible for a $7,000 grant. To ensure that you are taking advantage of all your entitlements it is recommended to talk to your local Aussie mortgage broker. Apart from helping you determine how much you are entitled to, they can help you compile supporting documentation and complete your applications.

0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Joondalup

The First Home Owners Grant in WA. What Am I Eligible For?

As there have been recent changes announced in relation to the First Home Owners Grant (FHOG) it is a timely opportunity to restate the basic requirements of the scheme.

The applicant's for a FHOG must be a natural persons over the age of 18 years, with one of them an Australian citizen or permanent resident. Neither the applicant nor their spouse can have received a FHOG previously or owned a residential property anywhere in Australia.

The current boost to the FHOG has been extended to the 30th September 2009. The FHOG of $14,000 for an established residence and $21,000 for a new residence will continue to that date. Thereafter the respective grants will be reduced to $10,500 for an established residence and $14,000 for new homes until the 31st December 2009. Thereafter the FHOG will revert to $7,000 only for an established or new home.

Several months ago the State Treasurer announced that the Government was considering the imposition of a cap on the value of properties eligible for FHOG, which was stated to be $750,000. The proposed cap has not been implemented but may be reviewed next year.


With respect to Transfer Duty a person eligible for a FHOG will also receive a transfer duty rebate on the purchase. For an established residence there is no duty up to $500,000 and thereafter calculated at the rate of $22.51 per $100 or part thereof so that on a $600,000 purchase it becomes the same duty as any other person pays on a $600,000 property. For vacant land there is no transfer duty payable up to $300,000 and thereafter it is phased in to achieve parity with the standard rate of duty at $400,000. Please note that these limits only relate to transfer duty; a buyer will be eligible for a FHOG for properties in excess of those stamp duty limits.

Disclaimer
The advices in this post are general in nature and further advice should be sought from IRDI Legal in relation to any specific situations you may have.

For further information please contact IRDI Legal on (08) 9443 2544 or visit our website at www.irdi.com.au

0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Joondalup

Perth's Hot Suburbs - Where To Find Value

When searching for the most suitable location to purchase your new property, value for money and growth are generally considered - more so if the property is for investment. So what Perth suburbs are currently considered 'under-valued'?

The July issue Australian Property Investor magazine's feature article is '18 Hottest Suburbs Revealed'. Perth features twice in this list by way of Rockingham and Mandurah. Recent infrastructure spending is the main contributor, according to the magazine. The rail and freeway extensions have recently opened, making the region much more accessable and so much more desirable.

A recent feature on realestate.com.au agrees. The below excerpt by Peter Koulizos also puts Rockingham as Perth's number one pick for house price growth and Victoria Park as the leader for units.

Houses – Rockingham
Ongoing expenditure by both the private and public sectors is a sure sign that this suburb will continue to do relatively well as far as property prices are concerned. Add to this the proximity to the sea and good rental prospects from Murdoch University, Challenger TAFE and the hospital nearby, both investors and home buyers will be targeting Rockingham in 2009.
View listings in Rockingham

Units – Victoria Park
Its proximity to the city, Swan River and the increased state government expenditure as part of the Network City strategy are just three reasons Victoria Park will do well in 2009. House prices are quite expensive but median unit prices are only $300,000. This is one of the few locations in Perth where renovating for profit is a very real possibility, due to the many character dwellings in the area.
View listings in Victoria Park

0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Joondalup

What is 'Genuine Savings'? Do I Need It?

Turn the clock back 24 months. The economy was booming, jobs were secure and house prices were growing faster than ever. Banks were lending up to 90%, 100%, even as much as 120% of the property value. The deposit was commonly the First Home Owners Grant or a gift from the parents or even a seperate loan. Then boom-time finished.

Banks started releasing statements like "Due to the increasingly volatile economic climate and rising unemployment levels the Bank is taking further steps to ensure it continues lending responsibly to customers. In particular, we are ensuring customers who are entering into more highly geared borrowings have a demonstrated savings pattern over time."

Instead of lending up to 120%, banks will generally now lend only 90% of the property value. Instead of allowing the deposit to be from almost any source, the lenders need evidence it is 'Genuine Savings'. But what is genuine savings? How do you prove you have it? And when will it be needed?

As a very general rule, when you borrow over 80% of your property's value you will need to have Genuine Savings - and proof of it. The Genuine Savings must normally be at least 5% of the property value. So how do the lenders ensure you have Genuine Savings and haven't just hocked your X-Box at Cash Converters? They generally require 3 months statements as evidence of one or more of the following:

• A demonstrated saving pattern established over a 3-month period
• Gift – must be held in an account for a minimum of 3 months
• Term deposit – must have been held for a minimum of 3 months
• Cash – acceptable only if placed in an account for a minimum of 3 months
• Shares – must have been held for a minimum of 3 months
• Equity in existing property
  However, be aware they probably will not accept the following as Genuine Savings:
• First Home Owners Grant (FHOG)
• Additional borrowed funds i.e. personal loan
• Proposed sale of an asset (other than property) i.e. sale of car

To wrap up, in most cases now when you borrow more than 80% of your property value, you need to show evidence of 5% Genuine Savings. Please bear in mind these are the most common guidelines, however every lender is different and they may be a way for you to buy sooner. Speak to your broker or mortgage professional for information specific to you circumstances.

0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Joondalup

Tips to Sell You House For More

If you are thinking of selling your home, or if you already have it on the market, of course you want to get the best price possible and you don't want to see it sitting on the market for longer than necessary. Making some small subtle changes to your property can mean a huge difference in the selling price and time on the market. Read through and see. Please add any other tips or experiences you may have for other readers.

INSIDE PRESENTATION

Ensure your house is clean and tidy
Remove any clutter.
Make sure windows are sparkling clean.
Check that all doors work well and doors don’t jam.
Think about how you arrange your furniture.
Consider obtaining advice of an interior designer.
Rub lavender oil into door jambs to provide a clean smell.
Shower screens, bathrooms and ovens should all be immaculate.

OUTSIDE PRESENTATION

Check gutters and remove any rust spots or debris
Mulch gardens and mow lawns, weed and prune shrubs
Replace any broken fences or missing pailings.
Ensure all gates are working properly
Clean paving to courtyards or pool areas.
Check all pool equipment is in working order.
Pool water should look inviting and well cared for.
Garages and carports should not be cluttered.
Try and store things away neatly.
Water features should be operational and well presented.

INSPECTIONS & HOME OPEN

Buyers will feel more comfortable when they inspect the house if the owner is not home.
Ensure the house is a comfortable temperature.
Brewing coffee creates a pleasant aroma throughout the house.
Open windows and blinds to create natural light.
Fresh flowers always add colour and are a must
Switch on your answering machine, phone ringing can be off putting for potential buyers.
If you are selling, or thinking about selling, with the intention of buying a new home you should speak with a mortgage broker sooner rather than later. Did you know you don't always have to sell your current home before buying the new one? I am a mortgage broker at Aussie Joondalup and am experienced with these loans. Contact me today to see how I could help.
0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au

Mike Cormack
Aussie Joondalup

Tips on Signing Real Estate Contracts

Before you agree to a contract make sure you understand it. This will prevent any problems and you will get the right home. Generally speaking, the law assumes that if you have signed something, you have read and understood it. Below are a few tips to consider:

• Carefully check that all the figures are correct
• Take your time and don’t be in a rush
• Read all the fine print
• Never sign a blank contract or allow someone to fill in the details later
• If you are unsure of something, ask
• If you are still unclear, get some independent advice
• Ensure that verbal agreements or claims made by the seller/or seller’s agent are written into the contract
• Be very clear about your own inclusion of conditions and requirements
• The agent should sign the contract in your presence
• Have any mistakes or omissions corrected before you sign
• Feel free to ask for an unsigned copy to take away and read in your time when you are not under any pressure
• Make sure you have a copy of the contract

These tips come courtesy of Rodney DeVille at Principle Property. If you are in the Northern suburbs and would like an honest appraisal of your properties potential sale value or if your looking to sell your house with someone who has fresh ideas and has the motivation to get the job done, Rodney's your guy!

0422 579 553
rodney.deville@principleproperty.com.au

Are we on the verge of a property market recovery?

Current data and market trends could certainly be interpreted this way. International Monetary Fund are now expecting higher growth for our economy. Strong exports, a strengthening finance sector and "significant macro policy response" are all contributing to the IMF outlook. Residential homes are selling quicker and for closer to the listed price. Auction clearance rates are trending up, as is overall Consumer Sentiment.

Are you thinking about buying? How long will you wait?

Why You Need to Re-Check Your Pre-Approval Now

Pre-approvals are extremely valuable. They let the bearer know exactly what their lender will lend them. They streamline the process of getting the 'full approval' once a property is found. They can help in negotiating a deal with the Real Estate Agent too. But beware!

Pre-approvals will generally last between 3 - 12 months before expiring. It is important to remember they are not a guarantee of finance. If the lender changes their policy, if your circumstances change or if the property you choose doesn't meet the lenders guidelines, you may receive a decline.

What can you do to help safeguard yourself against these situations?

1. Check with your mortgage broker or bank regularly to see how their policies may have changed, especially right before making an offer on a home.
2. Don't make any dramatic changes to your own circumstances between the time you get your pre-approval and finding your dream house. I have had clients in the past who have quit their jobs, spent their deposit on a new LCD TV etc, taken out large car loans and had a child! Seriously! These sort of things could cause your pre-approval to become invalid. Again, check with your broker or lender if your circumstances change.
3. If you are borrowing money to buy a house always, always, always make the contract "subject to finance". Even if you have been pre-approved, there are too many things that could cause the bank not to approve your loan and you may find yourself in an unpleasant situation.
   
   So if it has been more than a few weeks since you obtained you pre-approval, or if you are about to put an offer on a new home, call your broker.
   
   Mike Cormack

Welcome to Perth's Real Estate & Finance Blog

I am a Mortgage Broker. I need to keep up to date with changes in banks' policies, new loan options for my clients, changes in market conditions, FHOG updates, government announcements and so much more. Its my job to do this. I know where to get this information from and I know what information to trust. If you are not in the industry you may not have access to this information or may not know where to find it.

Not anymore.

I will be cutting through the growing forest of repetitive, dated online information and only posting a concentrated injection of information you need to know. Most importantly, it will be relevant - only current information pertinent to Perth citizens will make the cut.

So stay tuned Perth. Consumer Guides, client anecdotes, up-to-date changes, and local events will all be posted here. Updates will be regular. Stay in the loop and check back regularly.

Mike Cormack