Is it time to fix my home loan rate?

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May, 2017 by

Recently some lenders hiked interest rates without waiting for the Reserve Bank to officially raise rates, prompting some borrowers to consider switching to a fixed-rate mortgage. If you think a 0.5% or 1% increase could hurt you financially, it might indeed be time to fix your mortgage at the current low rate.

Fixing your rate makes it easier to control your budget because you know what your payments are going to be every month for the fixed period – usually 1, 3 or 5 years. Because your rate can’t go up during this time, it’s a good option if you think you would struggle to make payments if lenders raise rates. (But don’t forget, with a fixed-rate loan, you need to be prepared that if rates fall, you will keep paying the higher rate.)

Variable-rate loans may be more appealing if your goal is to own your home sooner by making extra payments, which isn’t always an option with most fixed-rate loans. Also, if you’ve made extra payments and think you might need to redraw some of that cash, that’s usually not possible with fixed-rate loans.

There’s also more flexibility with variable-rate loans. For instance, if you find a better loan, it’s simpler and less expensive to switch than if you were on a fixed rate. Meanwhile, if you have a fixed-rate loan and sell your house and pay off the loan before the end of the fixed period, you may have to pay fees.

If you prefer to have a bet each way, you can choose a split loan, part fixed, part variable. Usually you can split it however you like, allowing you to balance the risks of a rate rise with the flexibility of a variable-rate loan.

It’s important you find the best loan to suit your circumstances, so it’s wise to get advice from a professional such as a Finance Specialist from Our Broker. They work for you as a borrower – not the lenders – to ensure you receive the best rates and products available.

Do you have any tips to help me prepare to buy a property at auction?

couple standing in front of house

May, 2017 by

There are a number of steps to help you get ready to buy a home under the hammer.

Step one when buying any property, whether or not it’s going to auction, is to do your research. Be sure to spend time getting to know recent prices for properties similar to the type you want, in the area where you want to buy.

If you’re a first-timer, the auction process itself might seem daunting. Make yourself familiar with it by attending at least a half a dozen auctions. That way, you’ll be a lot more comfortable when the day comes for you to make a bid.

When you’ve found a home you want to bid on, ask the agent for the name of the person who will be auctioning the property. Then find out which other homes the auctioneer is selling and go and watch him or her in action at another auction. Knowing the auctioneer’s style and what to expect will give you a head start on the other bidders on auction day.

As there is no cooling-off period for a property that sells under the hammer, you need to have a pest and building report completed prior to auction. Also get your solicitor to run his or her eye over the contract and complete the strata searches to ensure everything’s in order.

As auction day approaches, it’s a good idea to gauge the level of interest in the property so you have a sense of the number of likely bidders. You could do this by asking the agent how many contracts have been issued.

Finally, it’s wise to set yourself a spending limit to prevent over-committing yourself financially on auction day. Do the maths so you go in with a clear understanding of how much you are prepared to pay. Your limit might be predetermined by the amount your lender is prepared to give you, so it’s advisable to have a pre-approved mortgage finalised before the auction.

 

Why should I refinance my home loan?

April, 2017 by

The Reserve Bank hasn’t altered interest rates since August 2016, yet many mortgage lenders have started imposing out-of-cycle rate hikes on borrowers.  

The lenders will often argue that the out-of-cycle rate hikes are needed to protect their profits and to keep their shareholders happy. As a profit making institution, a bank will always rank shareholder returns above more competitive mortgage interest rates for its customers.

However, as a customer, there is nothing stopping you from shopping around for an improved home loan interest rate. In fact, if you are paying more than 4.5% in interest on your mortgage, then you’re probably paying too much. And if you decide you are paying excessively high interest rates, then it’s time to consider ‘refinancing’ with another lender. Simply put, refinancing lets you change your home loan to suit your new circumstances.

But before switching, be aware that our financial services division, Our Broker offers a complimentary home loan health check. As a mortgage broker, we have an obligation to check for more favourable rates with other lenders for you, and whether there are any mortgage break costs you might have to pay if you switch your mortgage away from your current lender.

Apart from cheaper interest rates, refinancing your mortgage can provide an opportunity to streamline multiple debts through the process of ‘debt consolidation’. By folding several high interest debts such as a credit card or personal loan into one lower rate debt – which could be your home loan, it’s possible to trim your total monthly debt repayments. Moreover, you might be able to use these additional savings to pay off your home loan faster.

As part of the refinancing process, be sure to compare the ‘comparison rate’ against the ‘advertised rate’. The comparison rate will give you the true cost of refinancing the loan, including fees and charges. A financial specialist from Our Broker will be able to walk you through the best way to compare home loans before you settle on a refinancing option.

To find out more about how to refinance your home loan or the benefits of a debt consolidation, contact Our Broker on 1800 913 677.

How can I find out about changes to first home buyer incentives?

April, 2017 by

The FHOG provides one-off grants to first-time home buyers. They are funded by the states and territories, who each have their own laws governing them. Many states and territories also give stamp duty concessions to first home buyers.

Over time, successive state and territory governments have changed the amounts of money available and the eligibility criteria. As a result, the grants and tax breaks vary depending on where you live. Most are now aimed squarely at people buying newly built houses, but there are exceptions. The Northern Territory, for example, offers up to $23,000 in stamp duty relief for first home buyers purchasing an established home valued at up to $650,000.

There can be variations even within a state or territory. For instance, the Victorian Government recently announced that they will be increasing the FHOG from $10,000 to $20,000 for newly built homes in regional Victoria that are valued up to $750,000. The changes will apply to contracts signed between 1 July 2017 and 30 June 2020. For eligible first home buyers in Melbourne, the FHOG will stay at $10,000.

Last year, the Queensland Government boosted the FHOG to $20,000 for people building or buying a new home for the first time. But after midnight on 30 June 2017, the grant reverts back to $15,000. In addition to the grant, first-time buyers in Queensland receive a full stamp-duty exemption on homes valued up to $500,000; on homes priced between $500,000 and $549,000 the exemption is calculated on a sliding scale.

For more details on the first home owner grants and stamp duty concessions available where you live, go to: www.firsthome.gov.au.

What does bidding at an auction involve?

March, 2017 by

An auction is an increasingly popular way for a buyer and seller of a property to achieve fair market value. In fact, in the middle of March, the combined capital city clearance rate was 80.8%, which is a strong clue to how this method of sale is being embraced across the nation.

The two largest auction markets, Melbourne and Sydney, saw their preliminary clearance rates rise, with Sydney at 83.1% and Melbourne at 84.3%, while the highest clearance rate was in Adelaide where 87.0% of auctions cleared in the middle of March, according to CoreLogic. One year ago, the combined capital city clearance rate was a lower 64.9%.

Focussing on the auction bidder, if you decide you are interested in buying a home under the hammer, let the real estate agent know, so that you can be kept abreast of any movements – such as an early offer for the home – prior to the auction.

Likewise, seek some legal advice, if you are seriously interested in a property. Ask your solicitor or conveyancer to inspect the ‘Agreement for Sale’, which will be held by the auctioneer. Your legal adviser may suggest making additions or variations to the agreement. These changes can be negotiated between the legal representatives of both parties and, if the amendments are agreed, the contracts can be revised.

As part of your own preparations, attend as many auctions as possible to get acquainted with the process. At the same time, don’t leave anything to chance and get a building and pest inspection report on a property you’re serious about buying.

It is essential you take the time to do your research and have a sense of the potential value of the property in your sights. It is possible to compare real estate values in the area by monitoring websites such as the industry leading www.rh.com.au. As part of your research regimen, ensure you know when the home is available for inspection – and whatever you do, don’t forget to pencil the auction date into your diary.

Before attending an auction, it’s critical that your finances are in place. The winning bid at an auction is a binding contract and, so if you are successful, your finances must be in order. To make sure you’re financially ready, contact your lending institution or a mortgage broker such as Our Broker for finance approval. This way you’ll know your borrowing capacity and you can set your financial limit for the auction accordingly. You will need a written loan approval before the day of the auction, as well as a deposit, which is usually 10% of the purchase price.

What is stamp duty?

Stamp Duty Feature Square

March, 2017 by

In March the Victorian State Government announced that first home buyers won’t need to pay ‘stamp duty’ on homes valued up to $600,000, which will provide significant savings for first timers.

Additionally, those buying a home valued between $600,000 and $750,000 will also be eligible for a concession, which will be applied on a sliding scale. Significantly, the exemption and concession will apply to established homes as well as new builds.

For those new to real estate, stamp duty is a government charge imposed on many types of financial transactions such as a property purchase or share transaction. The various state and territory governments, rather than the Federal Government, oversee stamp duty, and consequently the tax can be calculated differently whether you’re buying in Melbourne, Perth or Darwin.

To add a layer of confusion, there are two categories of stamp duty. The most significant impost is the duty charged against the purchase price of a home. However, should you borrow money to acquire the home – and let’s face it most of us do – then the state and territory governments will hit you with a stamp duty impost against the mortgage.

More significantly, the Victorian Government will also remove off-the-plan stamp duty concessions on investment properties. This legislative change means the off-the-plan stamp duty concession will now be available solely for those who intend to live in the property.

It will be interesting to see whether other state or territory governments follow the Victorian Government’s lead. In the meantime, to find out more about first home buyer concessions in your state or territory, contact your local office of state revenue or a Raine & Horne agent.

How can I trim my energy bill this summer?

Close-up hand using remote control of air condition, selective focus

February, 2017 by

Research released recently by energy expert iSelect suggests that over 2.8 million Australian households plan to cut back on their spending to pay their summer energy bill this year.

Furthermore, 48% said the cost of energy will affect how long they use the air conditioner this summer. For what it’s worth, entertainment and dining are the expenses most Australian households were prepared to chop. This is a bit depressing frankly, as summer is the time for eating out, and having fun.

According to iSelect, most of us are prepared for large winter bills but during the warmer months, keeping air-conditioners running around the clock and the extra energy consumed by kids at home during the summer holidays using TVs and computers can result in summer energy bill shock.

Surprisingly, reducing the use of air-conditioners won’t slash your bill significantly advises iSelect. This is because large portions of our energy bills are made up of network charges and other mysterious variables expenses – that only the electricity companies understand, and more significantly are not associated with how often you use the air-conditioner, dishwasher or clothes dryer.

The survey also found that almost half of all Australians homes will use fans to reduce costs, however just 10% of householders are planning to search for a better energy deal. While reducing your energy use is important, shopping around for the most cost-effective plans can create some significant savings, according to iSelect. This is because tariff rates and pay-on-time discounts can differ extensively from provider to provider, and even from plan to plan with the same provider. In a similar vein, increased competition means some retailers are offering generous introductory offers or rebates to entice new customers to switch to their services. These carrots can save some cash.

iSelect also warns homeowners about flexible payment options offered by the energy companies. Rather, the comparison website, recommends that householders pay bills weekly, fortnightly or monthly, or sign up for bill smoothing which will divide your annual usage into even monthly installments, avoiding bill shock.

What is the value of a building and pest inspection?

Close-up hand using remote control of air condition, selective focus

February, 2017 by

Buying a home is a significant investment for all of us. For that reason the last thing you want to do is be forced to fork out extra cash to get rid of a nest of unwelcome termites or to repay some defective construction work left behind by the preceding owner.

That said, most contracts will be subject to a buyer obtaining a building and pest report. This condition allows you to terminate the contract if a building or pest report identifies that termites have white-anted the floorboards, or the house has wobbly foundation footings.

A pre-purchase building inspection by a licensed building inspector will reveal any potentially costly structural or safety issues within a property. It will also outline what work needs to be completed to return a home to a safe and comfortable standard – as well as the estimated cost for completing the repairs. For a buyer, it can give you some understanding of whether it’s a good buy or a lemon. It’s a little similar to buying a used car from private seller. It’s always advisable to get a mechanic to take a look under the bonnet before you hand over your hard earned. Likewise, when before you buy a house, be sure to get a building inspector to run his or her eye over the property. For this service, you can expect to pay between $250 and $450 for a pre-purchase building inspection.

Similarly for a few hundred dollars, a pest inspection can identify whether pests such as termites or white ants have been dining out on the property’s structures – as well as the expense involved in eradicating these pests and fixing the damage.

In most states and territories, it’s the buyers who must foot the bill for building and pest inspections. That said, if you’re a vendor looking for a way to put your property front and centre with buyers, it might be worth commissioning your own pest and building reports – moreover it will help you detect any problems before the buyers arrive to inspect your property

The age-old question: will updating the kitchen get a better price?

January, 2017 by

Absolutely, without question, the most impressive internal part of any house is the kitchen. It is the main ‘gathering’ zone of the home, and its ability to satisfy prospective purchasers can be a deal maker or breaker. Which is why any experienced real estate agent will advise, this is the first area for sellers to sink their improvement dollars.

However, before you race off ordering Calacatta marble bench tops, Gaggenau appliances and premium tap fittings, the essential issue is: how do I add value while not over-capitalising for my area? Yes, it is generally considered that in inner city areas, prices are usually influenced by purchasers that will pay for convenience; and to some degree, the more impressive the ‘updating’ the deeper buyers will delve into their bank account… but what if your area is awash with developers?

Professionals vs Bulldozers

Julianne Sheffield from Raine & Horne Fullarton, an inner-southern suburb of Adelaide, offered some wise advice: “In our area, the 30- to 40-year-old professional buyer is quite dominant. As they were born around the 80s, they expect something more modern than they experienced when growing up — they don’t have time to start ‘doing up’ properties once they purchase.”

However, Julianne also acknowledged the other side of the coin, “No matter how attractive the home, be aware of the developer market,” adding, “don’t spend so much that you price yourself above the buyer intending to send in a bulldozer instead of furniture.”

Adrian Root from Raine & Horne Baulkham Hills, a north-western Sydney suburb, drilled down into the kitchen’s specifics, advising, “In our area, buyers are expecting to see a decent kitchen. However, if updating, never go for bold colours like fire-engine red, or an Elvis purple… light, neutral colours always appeal — and expect to pay around $20K to $30K for a good return.”

Priced for the market

Closer to the city, Youseff Chmait, from Raine & Horne’s southern Sydney office of Marrickville, was also specific with his advice: “In our area, sellers should question the idea of spending up to $50K on a new kitchen. Really, you’d be amazed just how impressive kitchens can look by adding a new bench top and splashback, while making sure appliances are stylish.”

Not only is Youseff sensitive to the market presence of developers, but he also points out the growing presence of ‘Frank Sinatras’, that is, buyers wanting to get into a home and ‘do it their way!’

What a woman (and a man) really wants

Many millions of kitchens to the west, Susan Pitts, from Raine & Horne Bunbury, a port city south of Perth, has dealt with many kitchen/buyer issues. “It’s simple,” she said, “here, if you update a kitchen it will deliver a better market presence, and higher return.” Further adding the kitchen should be priced for the area, “Not too expensive, but not too cheap either, and definitely designed for the space with thought for functionality.”

Susan also added, “In our area, the woman wants a nice kitchen, and the man wants a good shed… get those two things right and everybody’s happy.”

And getting things right is the key question for those considering updating their kitchen for a good return. Based on all the variables of location, buyer demographic and budget, it appears there is one strong answer that all the referred agents agreed: ask your agent what to do before you spend money — they’re the ones that know what your area’s buyers want.

After all, even though the kitchen is the heart of the house, make sure you use your head instead when considering how to prepare yourself for the marketplace.

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