As a first time home buyer, you want to be smart when it comes to buying. That means taking your time and getting expert advice.
It’s a good time to start thinking about your purchase and finding Perth’s best mortgage broker. There are a few other things that are equally important for you to consider. That’s why you need to keep the following four tips in mind, if you are a first time homebuyer.
Be Realistic and Know What You Can Afford
Everyone wants to live in the million-dollar mansion on the hill. The truth is that most of us will never be able to afford it. Instead, you need to sit down and look over your finances.
What can you comfortably afford each month for a house payment? This information is important because it will determine the size of the loan you can afford. That way when you sit down with a mortgage broker, you and your broker can work through the options. If for example you can only afford $1,500 each month for a house payment, you’ll want to ensure that your broker helps to connect you with a loan that is better suited to your needs.
Double Check Neighbourhoods and Statistics
We all want to trust the realtor we are working with. Unfortunately, many of them are interested in simply selling a house and moving on to the next client. Before you sit down to make an offer, look into the neighbourhood and gain a better understanding of everything. Look at Google maps to get a feel for the street and proximity to main roads, and Google the address for any news or sale information. You’ll also want to take the time to determine if house prices are on the rise in the neighbourhood or if you are buying the property at peak pricing.
Remember, this is the biggest investment of your life, you can afford to spend some time playing investigator.
Avoid Settling on Your Needs
Before you even hit the real estate websites know what you want in a house. A need is something you simply won’t budge on. Keep in mind that as you view more properties and your eyes widen to feasibilities, as these may change slightly. That’s okay, but keep focused on what truly matters.
Write a list of deal breakers, the most obvious is likely the number of bedrooms. Other may be having an open kitchen, big bedrooms, en-suite, alfresco or having a garden. Some things are easy changes, like adding grass to an empty backyard space, while others, like adding in another bathroom, aren’t.
Keep Open and Honest Communication with Your Spouse
The first time home buying process is complicated and stressful. It is critical you use your spouse as part of your support system. It can help to calm your fears by logically talking things through. That way, you have some peace of mind and you are able to avoid surprises along the way.
Remember, buying your first home should be a fun and exciting time, but it is fraught with challenges. Make sure you surround yourself with support and don’t be afraid of opinions, but know that if it’s not your cup of tea don’t let others change that. If you’re not buying a property with a spouse then use a parent or close friend. They will keep you grounded and stop you making an emotional decision.
We work with first home owners everyday and have become very familiar with the anxieties, triumphs, challenges and excitements of first home ownership.
If you have any questions or are looking for free and independent advice contact us today.
Why Use A Mortgage Broker?
Let’s start with the most common preconception of mortgage broking – you don’t pay a mortgage broker, the banks do by way of commission or brokers fees.
This plays into everyone’s desire of paying as little as possible. The Perth property market is turning in the favour of the buyer, with many renters slamming the door on their landlords and moving to home ownership – cue the Perth mortgage brokers.
So let’s break it down; aside from costing you nothing, what else can a broker do for you?
1 – Get a better deal
Mortgage brokers are known for saving you on bank fees and capitalising on discounted interest rate periods and low interest rates, saving you thousands over the lifetime of a loan.
With a mortgage broker, Perth home buyers also end up getting the best rates possible. Lenders know that a good broker will bring them a stream of new clients, so they pass on better introductory interest rates and deals.
2 – Work around issues
If you’re struggling to get a loan then using a broker is your best chance of success. A broker organises mortgage finance for a living, thus knowing the ins and outs of receiving finance.
With a mortgage broker, you have the chance to get a yes from several different companies and to secure a monthly payment with an interest rate and features that work for you. If you go to the bank on your own, you’re going to get whatever they offer you and there is minimal leverage for the borrower. That often means you end up paying more than you would had you opted to work with the broker instead. In some cases, the rate they would quote the broker would be lower than what you would otherwise pay if you went with them directly. More importantly, the broker can help you to avoid many of the costs that are associated with closing the home loan.
3 – Personal connection
Taking the home ownership step, whether it’s a first home, new home or investment property, is a big event in everyone’s lives. A good broker will take your case seriously and personally.
It’s hard to find a mortgage broker that isn’t just about focused on getting you in and out of a transaction, but rather building a relationship, understanding your circumstance and delivering you suitable, sustainable and customised options.
At Loans My Way, myself (Michael) and the team pride ourselves at not just meeting, but exceeding your expectations.
With all the extra time and potential credit reporting issues you save by avoiding multiple home loan applications, you can spend more time on focusing on the perfect home and relaxing, knowing that you are going to end up with the best deal possible.
If you have any questions or think we can help you, please contact us today.
A reverse mortgage offers an excellent way to increase your income during retirement. With a reverse mortgage, you’re able to borrow against the equity in your home, yet you still retain ownership of your residence. One of the benefits is that you won’t need to make any payments like you would on a conventional mortgage, these are purely at your discretion. You can draw a small amount from the lender on a regular basis, which with a little consultation with Centrelink, will not impede on any of your current pension entitlements. You can also opt for monthly payments or a lump sum payment.
If you permanently move from your home, sell the property or pass away, the reverse mortgage has to be repaid, but all SEQUAL accredited reverse mortgages guarantee no negative equity and even of the mortgage exceeds the value of your home, you can still remain there for life.
When to Get a Reverse Mortgage?
When can a reverse mortgage benefit you? If you’re having a tough time affording a comfortable retirement, a reverse mortgage can be an excellent option. Your home is likely to be your largest personal asset, and your home may even be completely paid off. With a reverse mortgage, you can increase your income without increasing your monthly expenses, and you still get to stay in your own home.
The amount of money you’re eligible to receive will depend on several factors, including interest rates, your current age, and the home’s value. The older you are, the lower the greater the amount of equity you can access, plus, the more your home is worth, the more money you are eligible to receive.
Downsides to a Reverse Mortgage?
If you permanently move from the home, you will need to pay off the loan, which is another potential downside. While it may not sound like an issue right now, if you need full-time care at a senior facility, your loan would be due if you were out of the home for more than a year. Reverse mortgages also affect your estate by decreasing the equity in your home, leaving your heirs with less money. But by thoroughly exploring your options with a SEQUAL accredited broker, you can take significant steps to either minimise, or at least be aware of any potential pitfalls associated with a reverse mortgage.
Some Important Myths and Truths About a Reverse Mortgage
Before considering a reverse mortgage, it’s important to understand the truth about them. Unfortunately, there are many common myths surrounding these complex loans. Here’s a closer look at some common myths and the truth behind them.
Myth #1 – The Title to Your Home Goes to the Lender
Actually, you still own your home, since the reverse mortgage is just a mortgage against your home.
Myth #2 – Your Loan Could Be More Than the Property Value
You don’t need to worry about your heirs being left with a bill if you die or leave your home. This type of loan will never be more than the home’s appraised value at loan maturity, as long as there is a ‘No Negative Equity Guarantee’.
Myth #3 – If You Have a Current Mortgage You Can’t Get a Reverse Mortgage
Technically, this is true, but if you use the proceeds of the reverse mortgage to pay off the existing mortgage at close, you still can get the reverse mortgage if you meet the lenders criteria.
Myth #4 – You Could Be Evicted From Your Home
You are the one who chooses if and when you leave your home. Having a reverse mortgage will never force you to leave your home, since it’s not due until you no longer call that home your primary residence.
The opportunities and negatives of a reverse mortgage should now be a little clearer.
If you’re looking for some advice or looking into alternative finance options, contact us today for a chat and plan an approach to suit you.
I have been seeing increased advertising by finance companies offering to simplify and consolidate car loans and credit cards, which most of the time is an incredibly bad idea. But if you have to go down that path, then please consider the following points;
- More than 95% of vehicle and personal loans are fixed interest contracts, what this means is the interest rate is set, but so are the repayments and the amount you have to repay. If you borrow $20,000 at 7% over 5 years, your minimum repayment will be around $400 per month or $185 per fortnight. But when you settle your loan you will settle owing more than $23,750. Paying the loan out will not get you out of paying the interest back unfortunately. So if you consolidate this into a mortgage, you end up paying interest on top of your previously paid interest. Unless you are in financial dire straits always try to pay the personal car or vehicle loan out where possible.
- Should you still end up consolidating a vehicle loan, to make it pay in doing so, work out with your broker or bank a payment plan to clear that debt from your mortgage in line with the original loan term, rather than consolidate the repayment into the much longer home loan term.
- I am sure you all know with a mortgage that most of what you are paying back in the first 5-10 years is the interest to the bank, so if you do decide to refinance to save on rate, or for specific features, try to maintain your original loan term. On an average $400,000 loan over 30 years, you repay a staggering $307,094 in interest over the full loan term, even at the low rate of 4.09% p/a. If you refinance that mortgage 4 years in, back to a 30 year term, you will be adding an additional $46,811 to your original interest bill for that property. So where possible, stick to the original loan term or you may find any saving on rate is sacrificed to paying more interest over the full loan term. But if you need to take the loan back to its full term, then at least make a higher repayment that keeps you in line with your original loan term.
- Credit cards are another one that many people look to consolidate into a mortgage. Before taking this step do some research to see what other options are available, there are many 24 month low rate or interest free card transfer options, it may pay to discuss these with your broker or bank and set up a payment plan to clear the card in a set amount of time. But keep in mind this will only work if you shred the card and don’t use it throughout that repayment period. It is very easy to say, but you should never put more on your card, or have a higher limit than you can clear in a month.
We all work very hard for our money and debt can be a tool that you can use to help you out along the way. But be very careful of what you are being sold and by whom. Try not to let a 30 year loan turn into a 40 year loan after a few refinances, also make sure your financiers or broker have your best interest at heart and will be there with you and be prepared to be accountable along the journey, not just there to sell you into never ending debt.
In terms of tips for getting out of debt faster, nothing beats a sensible and well planned budget as well as paying a little extra when you can, we have tools available to help you with this.
As always for any questions or assistance, please get in touch.
We were recently lucky to catch up with Andrew Rankin of CBRE and the West Australian Treasurer, the honourable Dr Mike Nahan MLA, and have them run through the state of WA’s economy both now and what is forecast for the next 5 years. It was refreshing to hear that things aren’t as bleak as many commentators are suggesting. Here is a summary of that discussion;
WA peaked on migration in 2011 at a little over 80,000 new arrivals, we have enjoyed a 30% increase in population over the course of the mining boom, giving the state a current population of just over 2,000,000. In 2015 population growth is a little over 50,000 per year, with the bulk of that number made up from immigration on skilled migrant visas. There is no interstate migration to note at the moment, but that is expected to change into 2018 with the overall annual population increase figures expected to be just under 60,000 to 2019. This should give a little confidence in the local property markets ability to grow, plus create many construction and property investment opportunities.
The national average has been around 2.5% for the past three years, with this expected to trend upwards through 2016 & 2017 to level out to 3.5% in 2018. In Western Australia we are sitting currently a little over 3%, but this is a massive drop from around 5.5% in 2014. Unfortunately this downward trend is predicted to continue into 2016 bottoming out at 2%, but predicted to sharply rise back to 3.5% in 2017, from there it is set to moderate to just under 3% into 2018 & 2019.
From its peak of $76 billion in 2013, this will slow in its decline from just over $60 billion in 2015, easing to a predicted $46 billion to 2019. Exports of iron ore are set to continue to increase, it is heartening to note there has not been a reduction in iron ore exports since the early 2000’s. Other exports are set to hold relatively steady, but the big mover will be LNG as we are set to become the largest global exporter in this market, with exports set to nearly triple to $60 billion over the next 4 years. It is no wonder that Woodside and Chevron and all of the major mining players have positioned themselves in Western Australia, they get it right more often than not and see Western Australia as a business hub for many years to come.
Unemployment is set to peak in 2016 at a little over 6%, this is predicted to steadily decline back to just over 5% to 2019. Fortunately there has been an overall acceptance of lower wages post mining boom, which has allowed a lot of the returning workforce to be absorbed by the construction and retail industries and has fortunately led to unemployment rates remaining 2% under the forecasted rate, with a little luck this will continue to beat the predicted rate.
From the last peak in 2013, property currently is taking an additional 30 days to sell on average, current selling stock is up by around 6,000 properties, to around 14,000 properties on market. The median price is sitting around $420,000 currently, contracting from 2014, affordability is returning to the market. New houses are being built in record numbers, but new building starts are expected to drop closer to 20,000 per annum, slowing demand could limit property growth in the state.
Apartments continue to be massively over represented in the local market, it should be expected that prices will continue to soften in this sector, with the inner city suffering the most. So it could be a good time to negotiate hard on apartments if these fit your investment profile.
Prestige property ($1m plus) continues to drop from the 2007 peak and there have been some absolute horror stories in this end of the market, with some properties netting less than 50% their peak price in subsequent sales. The safest area of this market has proven to be the sub $1.3m brackets.
Rentals continue to ease with vacancies at near 5%, while rental yields are continuing to trend downwards, this is also something that is expected to continue for the foreseeable future.
The general consensus seems to be that we are near the bottom of the current property cycle in WA, with 51% of Australians wealth tied up in property, it will be most welcome when the local market returns to growth.
While we are nowhere near the highs we have previously enjoyed in WA, there is still $24bn committed to infrastructure over the current state budget period and many business sectors are expected to grow, such as; construction, agribusiness, education, administration, wholesale, accommodation, healthcare, food, arts and recreation along with professional, technical and scientific services. It still paints a pretty good picture for the state moving forward.
Well surprise, surprise, the Reserve Bank has again left interest rates on hold, an expected decision as mortgage holders again get to breathe a sigh of relief until February 2015. There are no signs on the horizon that rates will change early next year either, as we continue our record streak of low rates and stability that hasn’t been seen since the 1960’s.
In a survey involving 37 economists, a staggering 94% have predicted rates to change in 2015, with 89% of the 37 predicting the next shift will be upwards. Though no one can predict the future with any great accuracy, it seems that with sentiment at least, rates will be headed up in the not too distant future.
With the above in mind, you may ask what can you do to protect yourself? The answer is simple, take stock of what you owe the banks, have a look at how much you have been able to pay off over the past year or two, then make a plan of how much you plan to pay off in the next two to five years, and seriously consider fixing the rest.
As an example, if you owe $400,000, you have been paying $15,000 per year, you may want look at a 5 year fixed rate. The result could look like- $75,000 variable and
$325,000 fixed. With most banks, this will give you a small off-settable variable loan, with minimal exposure to shifting interest rates, plus a large protected sum of $325,000. Overall, this example with most lenders would give you the ability to clear $100,000 worth of debt in 5 years, whilst allowing you to be protected from upward rate movement.
With 5 year fixed rates still at 4.99% at most lenders, I am not sure if there has ever been a better time to consider the above, as these rates are the lowest they have been in the last 50 years.
Source article; http://thenewdaily.com.au/money/2014/12/02/confused-interest-rates-heres-deal-2015/
The winds of change are well and truly upon us, with APRA beating their drum trying to limit investor lending across the nation, there are a number of lenders penalising their existing investors or interest only customers.
Some lenders are increasing their rates for new and existing investors by up to 0.47% which is unfair and unusual punishment in our opinion, as it is not just in line with limiting future lending, but punishing and profiteering from existing clientele.
We will be expecting a two tier system to become more and more evident in the short term, but as always there are ways we can help you side step this issue. There has never been a better time to be using an industry lending professional with multiple lender options and sound market knowledge, as a one bank solution for investors is fast becoming a distant memory.
After hearing from key people within CBA this morning looks like we have an interesting ride ahead in Western Australia.
There is an expectation that the unemployment rate will get to 6.5% in 2015, as more workers become casualties in the iron ore war and gas workers move out of their construction and into their operational phase. But this increase in unemployment should largely be absorbed by the construction and retail sectors, as building approvals are trending substantially upwards. With an increase in construction activity, the retail sector will also help to ease the unemployment rate as homes are furnished and fitted out upon completion.
East coast workers appear to be leaving with interstate migration showing negative figures currently, but again this has been offset through immigration and natural growth, so there should be an increase in population of around 45,000 for WA in 2015, which should further aid the construction industry and help to support the rental market.
On interest rates, there is a strong view that there will be a further rate cut in March, with a possibility of further cuts in May/ June of this year. The low interest rate environment is expected to continue for the foreseeable future. Here is the ‘BUT’ though, with fixed rates at record lows, the chance to capitalise on this may be limited. There is an expectation as the US economy continues to recover and increases their domestic interest rates, the longer term money markets will become more expensive, and these record low rates will begin to evaporate mid-2015.
So what does this mean for you? There should be decent growth in the sub $800,000 housing market, as home owners are taking advantage of low rates to upgrade the family home. Money is cheap and the trends seem to suggest consumers aren’t afraid to invest that money into bricks and mortar currently. For the $800,000 plus market, growth will be flat for this area in the market, with limited activity and demand. But this gives rise to opportunities in picking these properties up at under market value, as motivated vendors looking to exit the market will need to discount, or accept a below market offer to move their property on.
If you choose to do nothing in terms of building, buying or renovating your current home, but still have a mortgage, be buoyed by the knowledge that with the aggressive pricing from 2nd and 3rd tier lenders, there has never been a better time to take a health check on your current borrowings, to make sure you are making the most of these extraordinary times we are in.
Contact us to find out more or discuss further.
The above is based upon opinion of economists, it should not be considered factual. Please undertake your own due diligence and consult the relevant professionals prior to making a decision on your finances and future plans
There is a lot of talk about interest rates decreasing in 2015, but what does this really mean for you? It will give the investors and owner occupiers a bit of confidence in the short term.
But how can you cash in on these historically low rates for the longer term?
The answer is simple, you need a good plan and it is better to plan when rates are low or nearing the bottom of the current interest rate cycle. As too many people start trying to plan when finances get uncomfortable, and interest rates are higher.
The first question you need to ask yourself is how much am I able to pay off the loan per year? Be realistic with this, if you can afford another $200 per week and you are paying off $5,000 per year already, allow yourself $15,000-20,000 per year. The next step is to take the remaining debt you are unable to pay off and secure that over the mid-term. If you owe around $400,000 and you are looking at a 3 year fixed rate, you could split the loan $340,000 3 year fixed and $60,000 variable, or 5 year fixed at $300,000 and $100,000 variable.
It may sound simple enough, but what does this really do for you?
For one it gives you certainty on the majority of your borrowings, you will be able to better budget and account for your expenses over the fixed period. Secondly it gives you protection against increasing rates, you will still have a variable portion of your loan, but this is limited and hopefully rapidly diminishing over the fixed period, limiting your exposure to interest rate movement.
Even though we cannot predict the future, you can be assured that low interest rates will not be around forever, please contact us to assist you in making a plan for your future?
Having had some recent discussions with clients looking to purchase property, I have been interested to hear their opinions, with many people choosing to wait until the new year.
This surprises me and I have been suggesting these people pay close attention to the market this time of year, really taking time to try and uncover the vendors story from the real estate agent, as knowing the selling parties needs is key to an advantageous negotiation.
Most people are aware that what doesn’t sell this time of year will sit around until February 2015, without much interest over the holiday period. But in any market there are always those that are under pressure to sell, there are always a portion of sellers that are moving interstate for work, or even those looking to relocate to ensure their children get into a good school district. Some may be coming to the end of a working visa and may be moving offshore.
Whatever the circumstance may be, never ignore the property market. There are always sellers looking to get out quickly and happy to take below market value in order to move on with life. So if you are looking for a house, unit or villa in the foreseeable future, get out there now, take the time out to talk to the agent, put on a smile and say “Tell me a little about why the sellers on the market?”