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Don’t Go Straight to the Bank! Give yourself Choice!

Searching for a home loan may not be hard, but understanding all the finer details can be.

There are a range of home loans available in Australia, so it can be hard to understand their features and whether they are right for you. This guide explains all you need to know.

Variable loans

Variable loans are loans that are subject to interest rate fluctuations. Whenever your bank increases or decreases interest rates, you will end up either paying more or less for your loan, depending on what the bank has decided to do.

A typical owner-occupied mortgage is taken out over 25 or 30 years, although you can reduce the overall term by making higher or more frequent payments. Mortgages are either based on principal (the amount you borrowed from the bank) and interest (the amount you pay back for having borrowed that money) loan repayments, or interest-only repayments (generally available for 1-5 years for owner occupied loans and 1-10 years for investment loans) where none of the principal component of the loan is paid down.

Fixed-rate loans

Fixed loans allow you to lock in a specific interest rate over a set period of time, generally between one and five years. This loan is popular among borrowers who want to ensure their repayments don’t rise. The main risk is that if variable rates fall, you are locked in at a higher rate. The cost of breaking a fixed rate loan contract can be substantial, and there can be financial penalties for making additional payments.

Split-rate loans

You can take out a mortgage with one portion of the loan variable, and the other fixed. In many ways, this offers the best of both worlds and you have the flexibility to repay more on the variable loan and reduce risk through the fixed loan.

Low-doc loans

Mortgage lenders require you to provide evidence of your ability to meet loan repayments, but this can be a problem for non-salaried workers such as the self-employed. Low-doc loans require less proof-of-income paperwork, but the interest rate levied is often higher than the standard variable rate.

Professional or packaged loans

Some lenders offer mortgages that provide ‘lifetime’ discounted interest rates, fee waivers and linked savings accounts and credit cards. These options are generally offered on high loan amounts.

Non-genuine savings loans

Lenders prefer borrowers to show they have the ability to save funds over time to cover their repayments. If a deposit is accrued quickly due to an inheritance or from other sources, lenders may provide less funding and require lenders mortgage insurance. Lenders mortgage insurance is a one-off insurance payment that covers the bank in case you can’t make your repayments. It is usually required for home loans with a loan-to-value ratio (LVR) over 80%.

Construction loans

These loans allow amounts of finance to be drawn down progressively to cover the various stages of a construction project. Repayments (generally only on interest for the first 12 months, then principal and interest thereafter) are only made on the amount of the loan facility that has been drawn down. However, there are line fees on the undrawn amount, or in most cases on the total facility limit.

Line-of-credit facilities

This is a way of tapping into equity in an existing home and drawing down funds as required for different purposes, such as renovations. Similar to a credit card, repayments are only made on the amount drawn down. Line-of-credit loans are often interest-only for a significant period, but can revert to principal and interest repayments down the track. Most lenders charge extra for line of credit accounts, either through a facility fee, undrawn funds fees and/or a higher interest rate.

Bridging loans

Bridging loans are designed as short-term financing options for borrowers who need funding to buy a new residence before selling their existing home. The interest rates on these loans are higher than the standard variable interest rate.

SMSF loans

The rules around borrowing funds within a self-managed superannuation fund are complex. Borrowings with a SMSF must be undertaken through a limited recourse borrowing arrangement, which limits the recourse of the lender to a single asset.

With mortgage lenders offering so many different products, getting professional advice is a must. A mortgage broker will support you with recommendations about what’s best for your personal circumstances.

For more information on home loans, book in your free 15 min phone consultation now http://premierlending.com.au/book-an-appointment/

Auction hammer

Selling isn’t a certainty at auction. In New South Wales and Victoria, for example, around a quarter of all auctioned properties are passed in.1 What does it mean for the vendor and prospective buyers when no one makes a bid?

After the auction
An auction campaign puts a property into the public eye, but not all interested parties will attend the auction or make a bid. This might be because they aren’t in a position to adhere to an auction’s binding sale conditions, or they need more time to consider the purchase.

Other parties may see a chance to skip to the negotiating stage if no one is bidding. In the wake of a failed auction, the agent will likely contact everyone who showed interest in the property during the sales campaign, in the hopes that one of them will make an offer.

Vendors: Research and regroup
If your property didn’t sell because your price was unrealistic, you might need to lower your expectations.

Find out how many days similar homes in the same area are typically on the market.

Houses left on the market for too long tend to attract lower sale prices, so if your campaign has stalled, it might be wise to take a break. You may want to consider launching a fresh campaign at another time with different photos, a new writeup and perhaps a new agent.

Buyers: Get ready to bargain
For prospective buyers, an unsuccessful auction can be an opportunity to nab the property at a lower price. Following a failed auction, the highest bidder earns the first option to negotiate with the seller. If their offer is rejected, the property will be open to all parties. There’s a good chance the vendor will be more motivated to sell if their property is still on the market more than two or three weeks after auction.

A failed auction may seem disastrous, but many properties that don’t sell under the hammer sell privately within a few weeks. So whether you’re a buyer or the vendor, be prepared to talk numbers.

To make an enquiry online with our team, click here. Alternatively please feel free to phone us on 8757 3871 or 0488 88 5363 during business hours.

Source:
1. www.realestate.com.au/auction-results

CarloansconcordShort of capital to buy equipment for your business? Consider asset finance to support your operations.

Asset finance is an umbrella term for any loan structure that helps a business purchase equipment, such as machinery or vehicles, for its operations. There are a number of loans designed to suit different situations.

1. Chattel mortgage or equipment loan
A chattel mortgage allows you to borrow money to purchase an asset. Your business owns the asset, but the lender has the asset as security until you complete the repayments. This frees capital and also gives your business automatic security for the loan.

2. Commercial hire purchase
With this option, the lender owns the equipment and your business pays hire fees to use it, which act as loan repayments. At the end of the agreed term, your business takes ownership of the asset. This spreads out the cost of the asset.

3. Finance lease
Like commercial hire purchase, a finance lease means the lender owns the equipment and the business pays hire fees to use it. At the end of the set term, however, the business can choose whether to purchase the asset.

This spreads out the cost of the asset and also provides flexibility.

4. Operating lease
Again, an operating lease means the lender owns the equipment and the business pays hire fees to use it.

The difference is there is no option to purchase the asset. The leasing costs are deemed operational rather than a liability on your balance sheet.

5. Novated lease
A novated lease is a financial arrangement between a business, an employee and a lender. The business borrows money from the lender for a motor vehicle, which the employee then leases from the business. The business owns the vehicle until the employee repays the loan. The repayments come from the employee’s gross salary, so there are some tax benefits for the employee.

Businesses need capital to purchase essential assets, and there are a number of solutions to support funding gaps. Talk to us today about your asset finance options.

august-2016

National property prices moved another 1.1% in August after another rate cut from the Reserve Bank, with varied results for each capital city.

National oversupply of apartments continues to weigh on the majors, creating a two-tier market between house prices and unit prices, with some of the capitals estimated to fall by 25% in the coming years.

Which capital city is making a comeback for house price growth?…

Check out the August edition of our Market Essentials Report:

market-essentials-report_premier-lending_aug-2016

Source: www.shearings.com

Source: www.shearings.com

How to avoid the dangers in buying a flipped home?

A flipped home typically refers to a run­down property that has been purchased, renovated and subsequently sold with the intention of making a quick profit.

If you’re in to analogies, think of it like buying a second­hand car. Before you spend your money on the car, you want to do your research. You want to ensure the bottom of the car isn’t covered in rust and that the bumper isn’t held on by super­glue.

While buying a flipped home can certainly be rewarding, it is also fraught with dangers. Just because something appears new and shiny on a superficial level, doesn’t mean there aren’t bigger issues waiting for you when you dig a little deeper.

Seller’s of flipped homes will often spend money on the things that are most obvious like a new kitchen or bathroom however they will often overlook the sometimes more important issues like structural damage and roofing issues. Before you buy a flipped home, be sure to conduct the following checks:

Structure

Conduct a thorough check to ensure the house is absent of structural issues. The last thing you want is to buy a house and subsequently have to replace a retaining wall. Be sure to also inspect the area under the house as it can provide you with a good sense of the overall conditioning of the house. While you’re down there make sure you look at the state of the piers. Have they been damaged or are they starting to erode?

Permits

Spend some time looking into the council requirements in the area and request copies of any Building Certifier’s Approval documentation. This will show what work has been conducted and by whom. Depending on the property, there may also be further rules. For example, some older houses in Australia will have heritage rules applied to them and may have a greater load of documentation. If you suspect that any work has been done to the property, make sure you do your checks.

The little things

Look for obvious things like uneven floorboards, dodgy painting and windows that don’t close properly. If there are simple cosmetic problems with the home, chances are there will be deeper underlying issues.

Plumbing

Don’t be shy, get down and dirty. Check every hot and cold tap is functioning, flush all toilets and look under all sinks in the home. The objective is to ensure there are no leaks or clogged pipes.

Electrical

It is worth checking out the electrical system to ensure it has been installed correctly and the wiring isn’t messy. Usually the electrical system is one of the first aspects that is seen to by the sellers of a flipped home, however there are always exceptions to the rule.

Roofing

Replacing or fixing a roof is an expensive exercise and therefore is usually something that can be left off the list when renovating a flipped home. Depending on what your roof is made of, look for any loose material, missing bolts and gaps. Also do your checks on the state of the gutters.

Wrapping up

If you do your homework, buying a flipped home can be a rewarding experience that can save you a lot of money. Hopefully now you are able to identify some of the main things to check before signing on the dotted line and consequently avoid any headaches in the future.

checklist

When you first move into your new home it is a good idea to take care of a few small things that can make a big difference when it counts.

      ✓ Change the locks on all your exterior doors. Unless your house is brand new you never know how many strangers may have a key to your front door.

✓ Replace the batteries in all the smoke detectors in the house. Record the date in your calendar so you will remember to do the same thing next year!

✓ Unless your heating/air units are new, have the vents and filters cleaned or replaced.

✓ Create a fire-hazard plan with your family and conduct a practice drill with the children.

✓ Replace or clean the exhaust hood filter above the range.

✓ Check all your electric outlets for loose-fitting plugs, as these can pose a fire hazard. These outlets are inexpensive and fairly easy to replace.

✓ Have the fireplace chimney cleaned. While you are at it go ahead and install a rain cap and a screen to keep the birds out of your chimney.

 

Home

 

 

Maximising the amount a lender will hand over to you isn’t about trying to take on unmanageable levels of debt. It’s a matter of taking a few simple but smart steps that could mean the difference between toiling in that ‘fixer-upper’ or owning your dream home.

Shop around for lenders

Different lenders define income in so many different ways that it pays to use a credit adviser who knows their way around what’s included and what’s not. One lender may allow share dividends as income, while another lender may not.

Shop around for the right mortgage

A good credit adviser will help you choose the most appropriate mortgage. Even with one lender, your borrowing capacity can vary due to the loan type that you choose. If you add features such as a line of credit this can reduce the amount you can borrow.

Update your financial records

Try to have your PAYG income tax return as up-to-date as possible. This gives a better historical view of your income than just the two most recent payslips.

Check your credit rating

Check your credit rating before applying for a mortgage. Due to changes to the Privacy Act from 12 March 2014, your rating may not be as healthy as you thought. The national credit reporting agencies are Veda, Dun & Bradstreet and Experian. Find out more here. <link: http://www.oaic.gov.au/privacy/privacy-topics/credit-and-finance/how-do-i-get-a-copy-of-my-credit-report

Roll your debts into your mortgage

Unsecured debts such as personal loans and credit cards have expensive monthly repayments, and these monthly repayments cut in to the amount you can repay on a mortgage.

Reduce debt and credit limits

If you have unused credit cards with limits that are more than you need, then cancel those cards. Also, cancel any other cards – such as department store cards – that give you credit. Every $1000 on a credit limit – even if not spent – detracts from the amount you can borrow.

Investigate family pledges

Guarantor or family pledges may let your parents or family take out a second mortgage on a percentage of their own property to guarantee repayment to the bank if you fall behind.

Consider shared equity

Some lenders will give you a larger mortgage in return for a certain share of the profits when you sell. If you don’t make a profit, then the lender does not take a share.

Take a long loan

While 25-year mortgages have been the norm, that’s changing to 40 years in some cases. A longer loan cuts your repayments, but increases the total interest you will pay over the life of the loan.

Save more of the deposit

Lenders look for consistent saving records, preferably for more than six months. Saving more can be as simple – or as hard – as doing without that extra coffee, or taking your lunch to work each day. It all adds up and reduces the amount you need to borrow.

Non-Conforming-LoansBuying a home can be stressful at the best of times. And for those with past credit problems, owning their own home may seem like an impossible dream to achieve. The good news is that there are lenders out there who will be willing to give borrowers a second chance, provided they have acceptable explanations about blemishes on their credit reports.

Blemishes on Your Credit Report

There are many reasons why people have bad credit, and not always is it caused by irresponsible behavior. Whether it’s from involuntary unemployment, divorce, injury or illness, credit blemishes are often a part of life. The good news is that they no longer have to prevent you from becoming a homeowner.

Clean Up Your Credit Report

Before applying for a home loan, the first thing to do is to order a copy of your credit report. You have the right to find out what’s in your credit report and correct any wrong information. You can receive a free copy once a year if you can wait 10 days. You may have to pay if you need the report faster.

You can get a copy of your credit report from these credit reporting agencies:

Veda.com.au PO Box 966, North Sydney NSW 2059 membership.query@veda.com.au 1300 762 207

CheckYourCredit.com.au (Dun and Bradstreet) PO Box 7405, St Kilda Rd, Melbourne, VIC 3004 pac.austral@dnb.com.au 1300 734 806

Experian Credit Report GPO Box 1969, North Sydney, NSW 2060 creditreport@au.experian.com 1300 783 684

Tasmanian Collection Service GPO Box 814, Hobart TAS 7000 enquiries@tascol.com.au 03 6213 5555

If anything is incorrect or found to be inaccurate, filing a dispute with the credit reporting agency can help to get the information corrected before speaking with a lender.

Providing explanations about the items on your credit report and learning how to prepare for your loan application could help you make home ownership possible.

Prepare Documents and Proof

Since you will be signing a privacy form for your lender to review your credit and make inquiries, it is best if you go in prepared for questions that will be asked by the lender. Review your report carefully and makes notes about any negative items listed. This information can then be presented to the lender along with your home loan application. The type of information that can help explain negative listings on your credit report may include the following:

Proof of Unemployment: If you were unable to pay your bills during periods of unemployment, having proper forms and letters from your former employer can help.

Proof of Divorce: Financial agreements or consent order to proof which party was responsible for which debt, to demonstrate the financial problems that may have occurred during a divorce.

Proof of an Accident or Illness: A letter from your GP to confirm any long term illness etc

Re-establish Credit Worthiness

After establishing the reasons for your credit issues, the next step is to prove to the lender that you have the financial means to purchase your home and to make your repayments on time every time. Establishing credit-worthy behaviour is not as difficult as you may think, even if you have had a prior bankruptcy, foreclosure or other financial difficulties. Here is a list important factors that your lender will look at while assessing your application:

Stable employment – Your employment must be stable over the last twelve months. This means same type of employment with the same employer.

Stable bill payments – During the last 12 months, you must have been making regular payments (on time) on any outstanding bills. Establishing a strong record of timely payments is the goal. A letter from the real estate agent or landlord confirming you have paid your rent on time would be also very helpful.

Deposit– Today there are lenders out there who will accept as low as a five percent deposit, but those with past credit problems may be required to shell out up to twenty to forty percent for a down payment on their new home. A buyer who pays a larger down payment obviously has more vested interest in the home and may, therefor, be less likely to default on a loan. Lenders to fund credit impaired loan usually have a tiered interest rate structure, meaning the higher the loan to value ratio, the higher your interest rate.

Before you start searching for a home, you should research all available option and most importantly enlist the help of a qualified mortgage broker.

2014 (small)_1

Overview

The Treasurer Joe Hockey delivered his first budget speech last night, containing few surprises. The Budget measures announced include increased ‘taxes’ in the form of a temporary levy for high income earners, tighter welfare rules, and wider cuts to education and spending.

Below is a summary of key announcements that you may affect you from a financial advice perspective. Please talk to your financial adviser for further details.

Highlights

Income tax changes
Temporary Budget Repair Levy

• A three-year Temporary Budget Repair Levy will be introduced for high income earners from 1 July 2014 until 30 June 2017. The Temporary Budget Repair Levy will apply at a rate of 2 per cent on taxable income in excess of $180,000 per annum.

• A number of other tax rates that are currently based on calculations that include the top marginal tax rate will also be increased in line with the Temporary Budget Repair Levy from 1 July 2014. An exception applies for fringe benefits tax (FBT), which will be increased from 47 per cent to 49 per cent from 1 April 2015 until 31 March 2017 to align with the FBT income year.

Superannuation
Excess non-concessional contributions tax changes

The Government has announced changes to the treatment of excess non-concessional contributions (NCCs).

• Excess NCCs made from 1 July 2013 will be able to be withdrawn, along with associated earnings

• If an individual chooses this option, no excess contributions tax will be payable and any related earnings will be taxed at the individual’s marginal tax rate.  Excess contributions tax will continue to apply for individuals who leave their excess contributions in the fund

• Final details of the policy will be settled following consultation

Re-phasing of superannuation guarantee rate increase

The Government announced another revision of the proposed increase to the superannuation guarantee contribution rate:

• confirming an increase to 9.5 per cent from 1 July 2014

• maintaining the 9.5 per cent rate until 30 June 2018

• ultimately the 12 per cent rate will apply from 1 July 2022

Social Security
Age Pension

• The Age Pension qualifying age will progressively increase further from age 67 from 1 July 2025, until it reaches age 70. This measure will not affect people born before 1 July 1958.

Deeming Thresholds

• The deeming thresholds for the income test will be reset to $30,000 for single pensioners and $50,000 for pensioner couples from 20 September 2017. The current thresholds are $46,600 and $77,400 respectively.

Commonwealth Seniors Health Card

• Income used to determine eligibility for the Commonwealth Seniors Health Card (CSHC) will be extended to include untaxed superannuation income from 1 January 2015. Account based income streams held by CSHC holders before 1 January 2015 will continue to be assessed under existing rules.

 • The Seniors Supplement will be removed for CSHC holders from 20 September 2014.

Family Assistance
Paid Parental Leave

• The Government has confirmed it will proceed with a new Paid Parental Leave scheme that will provide six months of paid leave, including superannuation, from 1 July 2015. However, the payment threshold is proposed to be reduced from $150,000 per annum to $100,000 per annum.

 Family Tax Benefit

• The Family Tax Benefit (FTB) Part B primary earner income limit will be reduced from $150,000 to $100,000 from 1 July 2015.

 • Payment of FTB Part B will be limited to families whose youngest child is under age six from 1 July 2015. Transitional arrangements will ensure families whose youngest child is age six and over on 30 June 2015 will remain eligible for FTB Part B for two years.

Fixed rates?With all the financial decisions that need to be made when purchasing a home, choosing the options that make the best sense for you can seem overwhelming.  Given the uncertainty of interest rates, deciding what type of mortgage to choose and from whom to borrow can be a difficult and time-consuming task.  One of the most important decisions is what type of mortgage to choose.  The choice between a fixed rate and variable rate mortgage can be an intimidating task if you are not armed with the facts, so here are a few things to consider before making a decision.

What Is Your Current Financial Situation?

One of the most important considerations to take into account before choosing a fixed rate or variable rate mortgage is knowing your current, short-term, and long-term financial outlook. If you are in a current financial situation in which your budget cannot handle the potential ups and downs of a variable rate, and a regular monthly payment makes more sense, then a fixed rate is probably a better choice.

What Is Your Long-Term Financial Outlook?

Another decision to make when selecting a loan is the amortisation period and the length of your current mortgage interest rate agreement.  If your current financial outlook is very similar to your long-term financial outlook, then you may want to consider a longer term, variable rate loan.  If, however, you are likely to have a considerable change or uncertainty in your income, retirement, or one income being lost, then choosing a shorter term, fixed rate may be the better choice.

Fixed Rate Home Loan

With a fixed rate mortgage your interest rate does not change for the agreed term of the loan.  Lenders generally offer fixed terms from 1, 3 or 5 years, however some go up to 7 to 10 years. At the end of the fixed term, your loan will usually convert to a standard variable rate. Because it offers the borrower an assurance that both the principal and interest will remain the same throughout the term of the loan, a fixed rate mortgage is ideal for many.

Some Benefits:

  • The interest rate will not change for the agreed fixed rate period. Should variable rates rise above your fixed rate, you will be happy to know you are paying less then what you could be paying with a variable rate

  • You know exactly what your repayments will be, makes budgeting easier

Some Disadvantages:

  • Extra loan repayments are often limited to small amounts if you have a fixed rate, or may only be allowed with a fee. Variable rate loans usually allow you to make extra repayments at no cost.

  • Although currently there are some really low fixed rates available, they tend to be higher than variable rates

  • Any interest rate decreases that might occur during the fixed rate term will not apply to your fixed loan.

  • Fixed rate loans also usually have a break fee if you change or pay off your loan within the fixed term e.g. if you sell your home

Variable Rate Home Loan

With a variable interest rate home loan, your interest rate varies throughout the course of the loan.  This means that your interest rate will likely both rise and fall multiple times during the lifetime of the loan.

Some Benefits:

  • Your interest rate can be cheaper than a fixed rate loan at the time of application

  • You will be able to make additional repayments into the loan, without any penalties

  • Depending on the loan product, you can have an offset account attached to the home loan to further reduce the interest payable

Some Disadvantages:

  • The amount of your regular repayments will fluctuate in line with any changes to interest rates.

  • You have no protection against interest rate changes.

Why Not Have the Best of Both – Splitting Your Loan

This option is becoming more and more popular. It allows you to bet both ways and only fix part of your mortgage. Most people fix their loan at 50% to manage some of the risk of an interest rate rise whilst having the option of making extra repayments. Your financial outlook for the fixed period should help determine at what ratio to split your loan.

Regardless of your financial situation, it is always important to get the advice of a qualified mortgage broker, and ensure that you get your mortgage through an established and reputable lender.

Answering the following questions and discussing them with your broker will allow them to offer an appropriate solution to your situation:

  • Do you anticipate any major changes to your family arrangements, your job or your business?

  • Are you thinking of selling your property in the near future?

  • Are you thinking of buying an investment property?

  • Do you want the ability to make additional repayments?

  • Do you want to be able to redraw funds from the home loan at some point in the future?

  • Do you want to be able to use an offset account to reduce your overall interest charges?

  • Do you want the security of your rate not changing?

  • Do you want the certainty of knowing what your repayments are going to be?

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About Us

At Premier Lending, we are experienced mortgage broking specialists, who are here to help you find the right loan for your situation. We are dedicated to creating personalised mortgage solutions that anticipate and meet the needs of our customers. We are a free, no-obligation service that will empower you to take control of your financial situation.

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