Are you ready to buy your own home, but don’t know what to do next?
For First Home Buyers it can seem like an eternity before you finally feel ready to purchase your own property. It’s exciting. You’ve done the hard yards, researched the market, put together a deposit, checked out a mortgage calculator and organised your financial affairs accordingly. At last you feel that all of your ducks are lined up and ready to go. But what you do next can make all the difference as to how smooth and stress free the next stage of the process will be.
This is where a simple phone call to a qualified mortgage broker can help. Because seeking professional advice and expert help along the way is the key step to getting it right the first time around with your finances and loan application. In fact an experienced mortgage broker will save you:
- Effort and Energy,
- Potentially thousands, if not tens of thousands, of dollars over the life of your loan by ensuring you get the right mortgage with the best features to suit your specific circumstances.
So if you are ready to own your own place, make sure all of your hard work and effort pays off and call us on 1300 559 229 today. Because the choice to own your first property is an important one, one which can form a solid foundation for your financial success into the future. And that’s worth getting the best professional advice available.
Until next time champions, we’re only a phone call away, Harry
As the great physicist, Sir Isaac Newton said, “What goes up, must come down.” However, when it comes to interest rates, the reverse is also true. Because we all know that Australia’s historically low rates cannot stay that way forever, and must begin to rise in the not too distant future. And even though there are mixed opinions amongst the experts on when the rate rise will occur, most agree that is only a matter of time before this happens. Which means at least one rate rise, if not more, is predicted in 2018.
7 Things to Do Before a Rate Rise
- Contact Your Mortgage Broker – Having a conversation with your broker is vital to keeping yourself informed and up to date with what’s currently available in the marketplace. Because new, improved loan products are continually being released and your broker can recommend the best product for your specific situation.
- Check Your Position – Once you understand what’s available, you can go to work and check your current financial position. Use our handy online Mortgage Calculator to run different interest rates and repayment levels to see how a rate rise could affect you.
- Consider Your Options – Ask yourself, “What would be the best scenario for my circumstances and what do I want to achieve for the future?” By being clear on the various choices available to you, you will make better decisions for the long term.
- Refinancing – Are you able to refinance your current loan or perhaps you may wish to fix your interest rate at the current low level for a period of time? Each has their potential benefits, but you must choose the best option for your situation. Ask your broker how.
- Budget, Budget, Budget- Create a budget and stick to it. This means being mindful of your money, cutting costs, spending less and living within your means. By doing so you won’t be over extended and financially stressed when rates do go up.
- Pay Your Mortgage Down – By paying your loan down faster with extra payments or by depositing lump sums, you can save money now and have your mortgage paid off years sooner. Plus when rates do rise, you’ll already be ahead of the curve with less to pay off in the future.
- Pay at the Higher Rate – Try paying off your loan as if you already had the higher interest rate on your loan. This means you’ll be paying off more each month and will be comfortable with the new amount when the rate rise occurs…because it will.
Until next time, stay prepared!
Budgets…we all know that we need them, yet many of us avoid them like the plague. In fact, most of us will do pretty much anything else but sit down and take the time required to create and manage our own budget.
But when you stop to think about it, organising and managing our finances is an essential part of life. And the paradox is that if we don’t take control and manage our money ourselves, it will be our finances, or lack of them, which dictate to us what we can or can’t do in life. So our money starts to control us! That’s not a great strategy when you are looking at purchasing your own home, refinancing or investing.
So the question has to be asked, “Why do we choose to ignore the important area of budgeting?”
From experience it seems that the answer lies in how we perceive budgets and how they work. Because, let’s face it, spending is seen as fun and sexy, whilst budgets are boring and restrictive. However, there is nothing fun and sexy about not being able to pay our bills, save for our dreams and create the life we aspire to. On the other hand, with a good budget, focus and persistence, we can achieve our financial goals and live a life we love.
So my message to you is to organise your own budget sooner rather than later…you’ll be glad you did.
For some great budgeting tips, check out my previous blog on the subject here. Alternatively, call us and speak to one of our professional mortgage brokers, we’re here to help.
When it comes to financing the purchase of your property or refinancing your current loan… the simple truth is your numbers count. So it is very important that you get to know your numbers before applying for your loan. And the best place to start with this process is by using the humble Mortgage Calculator.
Why? Because to use one of these super handy little mathematical geniuses you’ll need to get very clear on your particular set of numbers. These include the following variables:
Total Transaction Amount- This is the total dollar amount required to cover your property purchase and includes the agreed price of your property, stamp duty (if applicable) and any other associated in costs.
Deposit Amount- This is the total amount of cash funds and savings you have available to put towards your purchase.
Loan Interest Rate- This is your estimated % interest rate for the loan. Your mortgage broker will help you get the best rate possible for your circumstances.
Term of the Loan- This is the period of time over which you will repay your loan. This can range from 5 to 30 years, depending upon your situation.
Payment Period- When do you intend to make your loan repayments? Do you prefer weekly, fortnightly or monthly repayment cycles?
Repayments- This is the dollar figure of your regular minimum repayment amount and will be determined by your other numbers. Call us to calculate this for you.
Feel free to call us at Mortgage Coach and speak to one of our professional mortgage brokers to help answer your questions.
Until next time, here’s to knowing your numbers.
You should always take into consideration your personal circumstances as mortgage calculators do not take into consideration fees and service charges and any changes that may happen during the period of the loan. They should only ever be used as a guide.
We are often asked by clients, “Should I fix my interest rate?”
It’s a great question and one which is worth asking. However unfortunately there is no definitive, one size fits all answer to this particular enquiry. This is because it will always depend upon your current circumstances, budget, cash-flow, goals for the property (particularly during the fixed term period), how much flexibility you require in your loan and what you are aiming to achieve with your finances into the future.
On the other hand, if we look to the wider financial and economic environment, there are signs that interest rates may be on the rise in the near future. Firstly, in Australia we have had an unprecedented run of over 80 months straight without an interest rate hike.* In fact, the Reserve Bank of Australia (RBA) hasn’t increased rates since November 2010. Added to this, with the cash rate currently sitting at a record breaking low of just 1.5%, there is talk amongst respected economists that rates could rise within the next 6 months, and even as soon as early 2018. **
However, even with these conditions within the market place, no one knows for certain when and if rates will go up, unless they have access to a reliable a crystal ball. J So with this in mind, perhaps it is time to consider your options in regards to fixing your interest rate or staying with the variable rates available?
Below is a quick outline of some features of Fixed versus Variable Interest Rate Loans to help you to make an informed decision:
- Interest Rates – Fixed for the term of the loan, usually from 1 to 5 years. If interest rates rise, you benefit, however if they fall you don’t. At the end of the fixed period, you can re-fix, or roll it over into a variable loan. It’s important to note that the roll over variable rate is not usually the most competitive, so ensure you make arrangements to get a better rate.
- Flexibility– Once fixed, you can’t simply un-fix the rate during the period of the fixed term. So if you need to exit the loan early, there may be large penalties imposed by the bank, particularly if interest rates have moved upwards. Basically the lender will measure the economic cost of breaking the fixed contract and pass this on to you.
- Extra Repayments and Redraw– Apart from one or two lenders, fixed loans don’t usually allow extra payments to be made or restrict extra payments to a small yearly allowance. And if you do make extra payments, once the money is in the loan, you can’t access it until the fixed period expires.
- Best the Use When– You believe rates are going to rise and want to lock in a known interest rate before they do. When you are on a tight budget, don’t want to risk rising repayments, plus want the comfort of set repayments. Also, you know it will be unlikely for you to sell your property during the fixed rate period
- Interest Rates – These will rise and fall generally in line with the interest rate announcements of the RBA. If the rate falls you benefit, however if they rise then so will your interest rate and repayments. Lenders quote their Standard Variable Rate (SVR), however most of the variable loans we do are at a discount off this rate. So, don’t judge the lender by their published SVR, but rather by the rate of their specific loan products. Discounts can be from 0.5% upwards, which can make a big difference.
- Flexibility– A variable loan can be fixed at any time during the term of the loan. Apart from the cost of discharging the mortgage, around $350 for most lenders, there are no penalties for exiting the loan early.
- Extra Repayments and Redraw– Variable loans usually allow you to make extra payments into the loan. And any extra funds you pay into the loan are available to redraw. Because of this, it can be a great way to maximise the interest on your savings. Plus, you could pay the loan down, but not pay it out fully. This would give you easy access to redraw funds without going through a full loan application process again.
- Best the Use When– You believe interest rates will fall or stay stable and still want the freedom to make extra payments. When you have lump sum savings you can park inside the loan for some time. Or if you may wish to sell the property in the next few years.
As always, if you have questions or require further information, feel free to call us so you can speak with one of our experienced Mortgage Coaches. We’d love to hear from you.
Until next time,
As discussed in my recent article regarding Loan to Value Ratio (LVR), how much you can borrow is determined by two important factors: Your LVR and your Servicing Capacity. So this week I’m going to focus on the latter of these two. This is because when it comes to presenting a strong loan application it is not simply your income that your lender will consider. Instead it will be the all-important Servicing Capacity, or your actual ability to repay your loan, which will be key to your application’s success.
What is my Servicing Capacity?
Your Servicing Capacity is the amount of money that you can borrow based on how much you can afford to pay after all your income is allowed for, minus all of your current expenses and financial commitments. This amount is calculated by each lender via their own internal Servicing Calculator. Which means that how much you can ultimately borrow will vary greatly from lender to lender, sometimes by as much as $100,000! This is because the various financial institutions approach income and expenses (in particular) differently and each lender has their own unique formula to arrive at the Servicing Capacity figure.
To calculate your Servicing Capacity your lender will consider the following:
- Your Total Income:
This can consist of salary, wages, rental income, royalties, regular interest, Centrelink Payments, Family Benefits A & B (depending on the age of the children) etc. This income must be regular and ongoing as well as being evidenced by the appropriate documentation such as pay slips and bank statements. Examples of unallowable income can be Family Benefits paid as lump sums, a boarder renting a room or one off bonuses etc.
Some lenders (but not all) may discount or downwardly adjust income such as commissions, overtime, shift and other allowances under certain circumstances, unless it can be demonstrated that this is consistent income earned over an extended period of time.
- Your Total Expenses:
Car & Personal Loans– Lenders will require documentation showing your regular repayments on these loans, the applicable interest rates and how long the loans have before completion.
Credit Cards- Lenders will assume that all of your credit cards are maxed out or drawn to their full capacity, because in theory you can spend up to the total credit limits at any time. Therefore as well as gaining details of your current balances, they will want to know what your total credit limits are. They will then assume a minimum monthly payment of around 3% of your total combined credit card limit as an ongoing expense.
Existing Property Loans- Your lender will also want information about any repayments on other properties you may own, as well as the interest rates and how long the loans have before completion. If you have made extra payments and have re-draw capacity on the mortgages, then the limit on your loans, not the balances, is what the lenders will use to assess your repayments.
Living Expenses – In general most lenders will have automatic living expenses calculations based upon your circumstances, whether you are applying as a single, a couple, a family with children or group etc. This figure will increase for each additional dependent in a family.
Other Financial Commitments– These include items such as HECS debts, Store Loans, Hire Purchase Agreements, Furniture Rentals and Certegy Loans etc. These and any other regular expense commitments will also be taken into account to arrive at your Servicing Capacity.
- A Note On Savings
Demonstrating that you are able to save money and have a disciplined approach to doing so, has important benefits. This is because most lenders will want to see genuine savings of at least 5% of the purchase price of your property. Genuine savings is defined as regular deposits made over a period of 3 months or longer into a savings account in the name of the borrower. This can also be lump sum payments that have been put into a savings account but they must be held in the account for 3 months or longer.
An example of lump sum payments may be where parents gift the deposit, an inheritance is received or the proceeds from the sale of an asset forms part or all of the deposit etc. As a general rule, if you have an LVR of less than 85%, then genuine savings may not need to be demonstrated. Also when you have a deposit which is not genuine savings, this may not be a problem as there are specialist non-genuine savings lenders available.
From this brief rundown of the Servicing Capacity assessment process, it’s easy to see why the banks place so much emphasis on this key factor, because you must be able to show your lender that you can repay your loan. So if you are considering a property purchase, feel free to give one of our Mortgage Coaches a call to discuss your specific circumstances and potential Servicing Capacity position.
Until next time, watch those expenses,
As you may know, at Mortgage Coach our coachess get an extra special kick out of helping First Home Buyers (FHB) get into their own homes. So we are always looking for ways to assist them with their goals and smooth the way forward with their home ownership dreams.
So this week, I’m sharing some cool insights from a fascinating and enlightening new research paper by the Reserve Bank of Australia (RBA). * Apparently the RBA have been looking at changes in activity and purchasing success within the First Home Buyer (FHB) sector in Australia over the last 10 to 15 years. Some of the interesting stats they discovered include:
- There was a downward trend across the sector with less FHB actually transitioning to home ownership in the years from 2008 to 2014 forward, as compared with during the previous years from 2001 to 2007
- The biggest fall in numbers within the FHB sector, amongst those who became home owners, was within the 25 to 34 year old age group. This group fell from just under 12% of all FHB to just under 9%, with them delaying purchasing and therefore effectively becoming part of generation rent.
- This delay in entering the housing market seems to be strongly related to increasing house prices within many of the capital cities across Australia, which has been making it more difficult to save for a deposit.
However, the points which stood out most clearly to me from this report were:
- Even though FHB numbers may have fallen during this time, it was noted that those who successfully made the transition to home ownership were likely to be more capable with handling their loan responsibilities. They were also more likely to pay down their loans sooner and reduce their debt more quickly over time.
- However, the FBH across all age groups, who had received financial assistance from their family and/or friends to create their home deposit, were much more likely to experience financial distress and hardship over the lifespan of their loan. They were also more likely to have to later rely upon family and friends to assist them with their mortgages and financial affairs.
Now, from these very salient insights into the current FHB market, I think there are a few important take home points on the benefits of developing the saving habit for FHB.
- Learning How to Save is the Key: At any stage in life, possessing the discipline of saving is a powerful habit to develop. However, when it comes to FHB it is an absolutely essential skill to possess. Not only does it demonstrate that you can live within your means and spend less than you earn, it also shows that you have the ability to manage your money and your financial affairs over time.
- Savings Builds Financial Resilience: Once you have mastered the skill of saving on a small income, this can later be applied to larger amounts as your income and expenditures grow. It also means that you will be more likely to be able to handle your affairs if you ever experience financial challenges because you have a proven track record that you can be responsible with your money.
- Demonstrating that you Have Genuine Savings: Perhaps most importantly for FHB, by having a solid savings history and a healthy self-generated deposit for your home, your lender will see that you are a good candidate for a mortgage. Because, as these stats show, if you can save first and manage your money well to create a home deposit, you are more likely to be able to do so into the future. In this way everyone wins as FHB are better money managers, more financially resilient and more likely to pay off the home loans, whilst the banks and other lenders gain clients who are deemed to be lower risk and good financial managers.
So if you are looking for ways to improve your saving habits in regards to your home deposit or have some questions on how you can get on the fast track to home ownership, feel free to contact us at Mortgage Coach.
Until next time, wishing you happy saving,
* Source report from the RBA
Our Mortgage Brokers are often asked by prospective home buyers, “Exactly how much will it cost us in additional fees and charges to purchase our property?” And, perhaps a little frustratingly for some, the brokers’ answer will always be, “Well that depends upon your specific circumstances.” This is because when it comes to identifying and calculating the costs associated with buying a home, there really is no one size fits all answer.
As fees and charges can differ widely depending upon a number of variables across your particular situation and property purchase. However, as I am a firm believer in keeping things simple, I am happy to say there are just a couple of basics to bear in mind regarding your property transaction costs.
Cost You Can Expect
The most important thing to understand is that there are only a few costs which you are pretty much guaranteed to encounter when buying your property. The costs in this category are usually limited to the specific fees and charges involved with the purchase of the property itself and the potential costs resulting from the set up and creation of your home loan. However, even with these fees, there can be exceptions to the rule, as outlined below.
Stamp Duty or Transfer Duty – A state government tax which is based upon the purchase price of your property. This can be calculated with an online stamp duty calculator and will vary depending upon where your property is located within Australia. However, this can be levied at a concessional rate or even avoided in some instances. For example, with First Home Buyers in WA purchasing a property under the value of $430,000, no stamp duty is payable. Your Mortgage Broker can assist you with determining this.
Transfer Fee – A small state government fee levied for the transfer of title of the property from one person to another.
Application or Establishment Fee – This charge can be made by your lender to cover the costs associated with the set-up and initial admin of your home loan. However, these too can vary from $0 to $600 depending upon your finance provider and in some cases can be waived when your deal is submitted via a mortgage professional. It is best to speak with your Mortgage Broker regarding this charge to find out if it is applicable to you.
Mortgage Registration – A small state government fee which applies if you have used a mortgage or home loan to fund the purchase of your property. This charge covers the registration of the mortgage deed with the state government. However, if you do not have a mortgage, this fee is not applicable.
Conveyancing or Settlement Agent Fees – In order to handle the legal requirements, documentation and settlement of your property transaction, either a conveyancer or a solicitor is an essential. These fees and charges again will vary but there are maximum fee levels set by law. For example, on average you could pay around $1000 to $2000 depending upon the value of your property.
Other Costs to Consider
With the balance of the other potential fees and charges associated with your property purchase, it’s very much a case of checking with your Mortgage Broker. Which means that some costs may not be applicable to your situation, others may be optional, some could be nominal and others are just part of the process. However, in all cases it is best to be aware of these ahead of time.
Ongoing Mortgage Account Fees – These cover the management and maintenance of your loan with your lender and will depend upon which finance provider you choose and also on the type of package you select. They can range from $0 to $395 per year and some with higher costs may come with offers of lower interest rates. So check this with your broker.
Property Valuation Fee – This covers the cost of having your lender arrange for a market valuation on the home you wish to buy. This fee can often be included in your establishment fee and may even be waived depending on your lender.
Mortgage Insurance – This is usually required by the lender if your loan amount is over 80% of the value of your property, meaning that you have less than a 20% deposit saved for the purchase of your home. So for many of you this will not apply.
Building and Pest Inspection Reports – It is always wise to have the property you intend to purchase checked for structural integrity and pest activity before you proceed to settlement. These reports may cost around $500 and are recommended.
Utility Connection – As part of the preparation for taking possession of your new home you will need to set up and pay for the connection of your utilities. These include items such as internet, power, gas and water.
Council and Water Rates – During the settlement process your share of the applicable Council and Water Rates for your property will be calculated and incorporated into the funds required by you at settlement.
Home Insurance – Lenders will generally require that you take out home insurance on your property to cover the building in case of unforeseen damage to your home. The cost of this will be determined by the type of home, its age, location and the value at which you insure your property. Strata Fees – These charges apply only if your property is part of a grouped or shared development such as units, villas or apartments. The strata fees usually cover the cost of maintenance and insurance of common areas within the development.
Removalists – When you are finally ready to move into your new home you may choose to have professional removalists do this job for you or perhaps ask your family and friends to assist you. The choice is up to you. As always, if you are planning to buy a property and would like to speak to a Mortgage Broking professional, feel free to contact us here at Mortgage Perth. We’d love to hear from you. Wishing you happy buying, Harry
Are you looking for a short commute to the city? You can still pick up a bargain close to the city. Here are some tips.
Nollamara, Cloverdale and Belmont are among Perth’s 10 cheapest suburbs for median house price within 10 kilometres of the city, new reiwa.com data has revealed.
REIWA President Hayden Groves said there was great opportunity for Perth home buyers close to the city.
“Buyers in Perth really are in an enviable position. It’s unheard of in other parts of Australia, particularly in Sydney and Melbourne, for buyers to be able to purchase a house close to the city for less than $530,000.
“We are very lucky in Western Australia that there are still great bargains to be had in and around the CBD. It won’t always be this way, so I advise buyers to act sooner rather than later if they are wanting to secure an affordable house close to the city,” Mr Groves said.
Nollamara was the most affordable suburb on the list, with a median house price of $410,000 and a lower quartile price of $375,000.
“Buyers only have to look 10 kilometres north of the Perth CBD to find great value. Nollamara is currently undergoing a lot of change, with infill redevelopment rejuvenating the well-established suburb and attracting a lot of first home buyers to the area,” Mr Groves said.
The 10 cheapest suburbs within 10km of the Perth CBD
Year to June 2017 data for suburbs filtered for more than 20 sales.
Of the 10 suburbs that made the reiwa.com list, seven were located east of Perth.
Mr Groves said the eastern corridor of Perth’s inner city area held a lot of opportunity for home buyers.
“The median house price in suburbs like Cloverdale, Belmont and Redcliffe is hovering around the $450,000 mark, which is notably lower than the Perth median house price. First home buyers in particular will find good opportunity here, especially if they look to these suburbs’ lower quartile prices, which are even more affordable,” Mr Groves said.
“With the Perth Stadium and surrounding infrastructure nearing completion, the opportunity is there for savvy buyers and investors to purchase in a fast growing area at an affordable price.”
Now go and find yourself a new home close to the city.