Fixed or Variable? Which Way Should I Go?

WITH the major lenders all dropping their fixed rates in the last few weeks, it’s a good time to consider whether locking in a rate is the way to go.

There have been many studies which have shown that over time, it’s better to stick with a variable rate and ride the rollercoaster those rates can sometimes travel on.

Which is exactly what interest rates have done in the last few years here in Australia. In August 2007, the official cash rate set by the Reserve Bank was 6.5 per cent. By December that year it was slashed to 4.25 per cent at the start of the GFC and by the following February it was 3.25 per cent.

With more global uncertainty and unemployment numbers up here locally, the banks dropping their fixed rates, there’s speculation that the RBA will cut the cash rate from 4.75 per cent when they next meet on September 6.

However, Aussie’s Executive Chairman and founder John Symond said while there is a chance variable rates will also drop in the upcoming months, a fixed rate can be useful for homeowners, particularly if they are planning a change in their circumstances.

“Fixed rates are good when you’re planning to start a family, or a work situation is changing as it gives the homeowner some security over the level of the repayments,” he said.

Mr Symond said fixed rate loans have conditions such as the amount of the extra repayments which can be made each year, break costs if the house is sold or the loan is paid out early and a lack of extra features which might be associated with variable loans, such as redraw.

“Personally I believe it’s better to go with a variable rate as you can pay as much as you like off the loan, reducing the term and the level of interest payments,” he said.

“However, if homeowners are concerned about interest rates going up the perhaps splitting the loan into a fixed and variable component may be a good option.

“It’s an each-way bet, which gives some peace of mind over the repayment amount while still allowing them to repay the variable component as fast as they want.”

To discuss how each option could benefit you, call Mike Cormack from Aussie Home Loans Joondalup and claim your free 60 minute consultation on 0403 144822 or visit Aussie Joondalup

7 First Home Buyer Mistakes to Avoid

Higher levels of savings, increasing rents, stable interest rates, a softer housing market and the banks relaxing their lending criteria have all combined to create a unique opportunity for first home buyers looking to get on the property ladder. There are some common mistakes that first home buyers make, however. Make sure you don’t fall into these traps:

1. Changing jobs or making a major purchase at the same time as applying for finance.
2. Not getting your finance pre-approved, and leaving everything ‘too late’ when the ‘right’ property is found.
3. Borrowing right up to the amount the lender is prepared to loan you, and then being financially over-stretched.
4. Letting emotions take over in the negotiation process, and paying too much for the property—or missing an opportunity to negotiate more favourable purchase conditions.
5. Not doing your diligence and checking out things such as council zoning, building approvals and restrictive covenants.
6. Buying a ‘do-up’ and then running out of money. Renovation is not a cast-iron route to riches, and if it turns out to cost more than you bargained for, you could be living in squalid circumstances for too long.
7. Forgetting to sort out property insurance well before you move in, and forgetting to tell the utility companies!

Aussie Joondalup broker Mike Cormack has been a first home buyer himself and has 6 years home lending experience to draw on. He regularly successfully guides local first home buyers to their first home. Email Mike for a free copy of his Aussie First Home Buyer Guide and see how he can help you too.

What Do You Need To Know About The First Home Owners Grant Changes?

Until 1 January 2010 the cost of your first home did not effect your eligibility for the First Home Buyer Grant. The state government has now introduced a maximum price cap. The cap limits the total value of properties (i.e. total value of home and land) to $750,000.00 or less, or if the home is located north of the 26th parallel to $1,000,000 or less.

When EXACTLY Does (Did) it Start?

The First Home Owner Grant cap applies to all eligible transactions in W.A. that are made on or after 1 January 2010. That date is determined as follows:
* for Established, New Home and Off the Plan – the date when the contract is made; and
* for Contract to Build – the date when the building contract is made; and
* for Owner Builder – the date when laying the foundations for the home begins.

How Do They Calculate a Properties Value?

The total value of a transaction can be determined by:
* Established, New Home or Off the Plan - the higher out of the contract price, or the unencumbered value.
* Contract to Build – the total of the contract to build, and the unencumbered value of the land.
* Owner Builder – the unencumbered total value of the home and land, at the date the transaction is completed

PS Remember this information is a guide only and you should contact a First Home Buyer expert to discuss your specific details. The Aussie Mortgage Advisers in Joondalup are trained in this area. Call them for more information during normal business hours on (08) 9300 0686

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

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

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