Mortgage Mistakes

Most mortgagees will refinance their home loan several times over the period of the loan. In fact, loan experts agree it’s important to reassess your loan every 5 years or so to ensure you are still on the right financial path.

Be careful though, many borrowers make one or more of the following mistakes when looking to refinance:

Stick with their current lender for no real reason – Don’t be afraid to look around and change lenders providing the alternative is a better option for your needs. Lenders don’t generally make an effort to keep your business so don’t feel obliged to stick with them.

Choose the lowest interest rate – Assuming the lowest rate is the best option is sometimes short-sighted. Be sure to choose the loan that meets all of your requirements e.g. offset account, redraw facility etc. The overall package is what’s most important.

Apply with several lenders – a common mistake is applying with a great deal of lenders and brokers to find the best deal. The more you apply, the more often a lender or broker conducts a credit check. More credit checks, more often actually harm your credit history and may lead to rejection or less than ideal interest rates.

Don’t read the fine print – a mortgage is a huge financial commitment. Not fully understanding what you are signing up for can come back to bite you later. Check the terms and conditions of the loan carefully, this is your money at stake.  And never be afraid to ask for explanations of fees you are being asked to pay.

Blindly trusting the inexperienced – lenders that have been in the mortgage market for a short while may not offer the same level of service or ongoing competitive pricing. Lack of flexibility in loan products can also add significantly to the cost of a loan, especially for property investors.

Historically low rates were unable to offset increasing mortgages

The Real Estate Institute of Australia (REIA) says that in the September quarter of 2016, housing affordability in Australia declined marginally with the proportion of the median family income required to meet average monthly loan repayments increasing to 29.5% from 29.4% in the previous quarter.

REIA President Neville Sanders said, “The recent Adelaide Bank/REIA Housing Affordability Report shows that whilst the proportion of the median family income required to meet average monthly loan repayments increased by 0.1 percentage points, it is still at the lower end over the last seven years. Unfortunately, historically low-interest rates were unable to offset the increasing size of mortgages resulting in the rise in the proportion of the median family income required to meet average monthly loan repayments.”

“Over the September quarter, affordability improved in Victoria, South Australia, the Northern Territory and the Australian Capital Territory. New South Wales remained the least affordable state or territory for home buyers. Tasmania had the smallest average loan size while the proportion of first home buyers on the owner-occupier market was the largest in Western Australia.”

“The September quarter brought good news for renters. The proportion of the median family income required to meet median rents decreased by 0.6 percentage points to 24.2% during the quarter and South Australia was the only jurisdiction where rental affordability worsened.”

“The Australian Bureau of Statistics has recently revised its housing finance survey with the changes affecting statistics on owner-occupied and investment housing, the number of first home buyers and housing loan outstanding to households. These changes affected our September quarter publication.”

“The revision downgraded the proportion of first home buyers in the total number of owner-occupier housing finance commitments. It is extremely disappointing that the revised figures show fewer first home buyers since 2012 than previously reported. First home buyer financial commitments are down to 13.1 per cent of total owner-occupied housing in September. This is the lowest figure since the ABS series was commenced in June 1991 and compares to an average of 18.5 per cent over the period. With the average loan sizes continuing to rise REIA is concerned that the proportion may fall even further in the coming quarters,” said Mr Sanders.

Homebuyers delaying first purchase

The Australian Bureau of Statistic has just released figures indicating Australians are entering the property market later than ever before.

The 2013-14 data, shows that less than 50% of Australians bought their first home between the ages of 25 and 34 years old. Back in 2000-01, that percentage was up over 60.

One of the more obvious downsides to buying later in life is the prospect of lingering mortgage repayments well into retirement. The proportion of households aged 65 and over still paying off their mortgage has more than doubled, having risen from 3.6% of all households aged 65 and over in 2000–01, to 8.2% in 2013–14.

Buying later can certainly be attributed to a booming Australian property market whereby many young Australians simply cannot afford to pay the impossibly high prices. There are ways to combat this growing trend though. Here are 5 ideas for first home buyers to consider:

1. Investigate all government grants and incentives – there are fewer options available than in the past but some help is still there to take advantage of

2. Look at a unit/apartment rather than a larger house – start small and work your way up over time

3. Ask a parent to guarantee your loan – that way you can borrow up to 95% of your loan without paying Lenders Mortgage Insurance

4. Formulate a strict savings plan – and stick to it! If you can manage to set aside $350 a month, within two years you’ll have saved $20,000!

5. Co-borrow – many first home buyers have shared the costs with a friend, partner or family member with great success. Exercise caution and always seek legal advice.

Less Stuff, Less Stress

It’s entirely understandable that as we progress through life we accumulate more possessions. But according to a study of Australian homes by the Australia Institute, we are accumulating far too much, and to the detriment of our health.

The problem begins when we surround ourselves with stuff that we either don’t need or don’t use. The Australia Institute found that one in five people had built a shed or garage to store excess things, whilst one in eight had even moved house to accommodate their excess clutter. Crazy!

The study also discovered that “women feel more stressed, depressed and anxious when their home is cluttered. Being surrounded by excess items not only wastes your time as you search for things, but it also promotes the consumption of comfort foods, reduces sleep quality, limits creativity, and makes you more indecisive about which of your daily work or household tasks to carry out.” Sound familiar?

So as we enter the new year and resolve to make certain changes in our lives going forward, why not take a look around your home and see if you might need to ease your stress with a major declutter. You’ll feel the benefits instantly. For further inspiration check out The Minimalists. These guys are extreme but can offer great tips on how to reduce the amount of stuff we own.

$2million is becoming the new $1million

The Melbourne property market is driving a national spike in $2million+ property prices.

Not that long ago, $1 million guaranteed the purchase of an exceptional family home – a property where you could settle in and expect to be comfortable for life, only looking to downsize when the nest became empty.

Over the past 12 months until June, the national figure for the number of properties selling for greater than $2 million exceeds 11,000 according to figures released by Core Logic. And this is more than double the number from five years ago. Twenty years ago, there were just 236 $2 million + sales across Australia.

The breakdown between houses and units in the $2 million+ range shows 9,882 were house sales and 1,437 were units. The largest concentration, not surprisingly, was in Sydney and Melbourne. Australia’s other states and territories combined represent only one-tenth of all $2 million+ house sales and a quarter of $2 million+ unit sales in the past year.

In the June 2016 quarter, the REIV has released figures showing that there were five Melbourne suburbs that recorded a median price of greater than $2 million*.

Core Logic’s Cameron Kusher says this data provides dramatic evidence that the cost of housing in Melbourne and Sydney is detaching itself from the rest of the country.

Why Your Property Isn’t Selling

Whilst Melbourne’s property market is hot right now, every now and again a single property doesn’t seem to sell. If this is your house, don’t despair. Try asking yourself these three simple questions and you’re likely to find the answer:

1. Is the price right?

The number one determining factor for selling a property is the price tag. If the asking price is too high your property will almost certainly spend more time on the market. While the current market is experiencing high clearance rates, not all properties are selling over the reserve. Personal attachment can sometimes over-inflate the dollar value you place on the house or unit. Ensure you research and compare other similar properties in the nearby area to gauge a realistic figure.

2. Is your property shining?

If attendance numbers are reasonable at open for inspections but you are yet to receive an offer, the presentation could be a problem. Decluttering and keeping personal items to a minimum are ‘no brainers’ but there are also several low-cost improvements you can make that will strengthen your property’s wow factor and make it shine.

Such enhancements could include a fresh coat of paint, carpet cleaning or replacement and a working bee in the garden to really get the exterior neat and tidy. Engaging the services of a property stylist can also be an extremely worthwhile investment if your existing interior décor is a little tired.

3. Are you listening to the experts?

Real estate agents are obliged to provide unbiased and honest feedback about why your property is not selling. Try to keep your own personal opinions out of the picture and listen to the experts. It can often be a minor, simple change to your price, presentation or selling strategy that makes all the difference.

Bumper Melbourne Spring Market!

The 2016 spring property market is delivering everything home sellers desire: solid price growth, high clearance rates and strong buyer demand.

September quarter median house figures published by the REIV also indicate a positive and growing market. Melbourne’s median house price increased 3.25% since June to settle at $740,000. The inner and middle suburbs were the main growth drivers in the September quarter with house prices in these areas up 4.2% and 3.5% respectively.

Outer suburbs were not without positive results, however. Langwarrin, for example, recorded the city’s largest price growth with the median house price increasing 20% over the September quarter to $561,000. Many outer suburbs like Langwarrin remain attractive to home buyers and investors because of their value and space. Better affordability in Melbourne’s outer neighbourhoods is also an appealing factor for many first home buyers just breaking into the market.

Meanwhile, apartment prices across the city also increased in the September quarter with the overall median up 2.1% to $545,500. These figures are stronger than expected by many market experts, including the REIV.

The auction clearance rate across Melbourne is up around 80% with numerous properties still attracting multiple groups of bidders all competing for the purchase. Whilst demand remains high there are still fewer houses and apartments on the market than in previous years.

Inner-city cottage character attracts downsizers

Small period homes are surging in value across the inner ring in recent months – as reflected in current data compiled by the REIV.

In recent months, period homes in inner Melbourne have sold for as much as $10,000/square metre as buyers focus on securing small, character home in good locations.

Inner-city cottage character attracts downsizers

The most sought after area for these smaller – one and two-bedroom – homes in recent months is in Melbourne’s north and inner west, where buyers continue to look for value.

Northcote has seen a $200,000 rise in the past three months (from 1 June to 20 August) compared to the same period last year.

This growth, of close to 30 per cent, is just ahead of Footscray which has seen a $253,000 increase (25 per cent ahead of the same period last year).

REIV CEO Geoff White said that character homes were ever-popular in inner Melbourne.

“With development growth in the inner suburbs, there are fewer of these homes than there were in the past,” he said.

“Yet they seem to be just as popular as ever before – with the demand, and lower supply, leading to prices close to or above $1m for these smaller homes.”

Mr White said that the market is currently “ripe” for this sector of the inner-city market.

“Period style homes are particularly attractive to downsizing homebuyers, offering character living in a smaller property,” he said.

“The ‘downsizer’ demographic continues to grow, as children leave home and empty nesters look for CBD fringe, smaller homes.”

Landlord Insurance – A Great Investment

The astute property investor knows the value of good landlord insurance. A first-rate policy can offer peace of mind and assurance that if something does go wrong, the financial costs will be minimised.

Whilst most tenants take good care of the property they are leasing, those that don’t may intentionally cause extensive damage. And any intentional damage is not usually covered by a standard home insurance or body corporate policy.

Not only can the cost of repairs add up, rental income can cease whilst repairs are undertaken and new tenants found. These headaches can easily be avoided with a sound insurance policy specifically tailored for landlords.

Failure to pay rent is the other significant risk facing landlords. Without insurance investment, property owners can lose significant rental income dollars if a tenant stops paying rent. Evicting and replacing a tenant can take time and landlord insurance can take some of the stress out of that situation.

Here is a list of the general landlord insurance features to look out for when considering different policies:

1. Malicious or intentional damage to the property by the tenant or their guests

2. Theft by the tenant or their guests

3. Loss of rent if the tenant defaults on their payments

4. Liability, including for a claim against you by the tenant, and

5. Legal expenses incurred in taking action against a tenant.

It’s important to remember that not all landlord protection policies are the same. Some, for example, are designed to be taken out in addition to a typical home and contents or strata title policy. Others may allow you to take out cover for the contents of the actual investment property. This is particularly helpful if the property is partially or fully furnished.

Always take time to research various premiums and read the fine print. Ask questions when you have concerns and don’t forget to claim the cost of the insurance at tax time. Finally, with the help of our professional property management team, the risk of any investment hiccups is further reduced.