'Home Loans'

Emotions felt by potential property buyers in Melbourne are: disappointed, confused, annoyed, shocked and at times angry!  As buyers miss out on properties that sell for far more than the advertised quote, the question needs to be asked whether this is a result of under quoting or a warming market about to make another bull run.

We seem to be on the fringe of another silly season in the property market, with houses often selling for hundreds of thousands of dollars more than their advertised price. 

These price blow-outs devastate buyers who are trying to scramble into the market before the seemingly imminent property ‘surge’.  The environment of low interest rates, economic stability, low unemployment and very strong rental returns is driving investors back into property. 

“Under quoting”  is the practice of advertising a very low sales price for a forthcoming auction, thus casting the potential buyer’s net far and wide to encourage more people to attend the auction.  It can be argued that Real Estate agents are doing their best for their clients by trying to get the best prices for their clients, but buyers are spending money on building inspections and bringing along their parents to the auction thinking they’ve got a chance. But in the end they’re ‘blown out of the water’ and disappointed once again.

Harry Pontikis, Director of Chocolate Property, believes that the best time to get into the property market is when it suits each person’s individual situation.  If you have a stable job, with enough money left over each month to pay back a mortgage (instead of paying rent), negligible personal debt like credit card debt, then the time is right to buy for you.  There are enough choices in the mortgage market to cater for all first home buyers and investors to buy a house. 

“Attempting to predict peaks and troughs in the property market as the triggers to purchasing property is certainly a recipe for disaster.  Property investment should rarely be seen as a transactional investment type.  This is because of the sizeable entry and exit fees, taxes, mortgage fees and other costs associated with purchasing property.”  For this reason, Harry states that “if you wish to buy a house for investment purposes, you should look for long term investment through capital gain, rental returns or if you are fortunate – both.  Otherwise, buying a home to live in, has a totally separate set of rules to buying an investment property and these two motivators should not be confused or interchanged.”

The ‘true market value’ of a property, is putting it in front of the public and seeing how much they are prepared to pay for it.  In the current climate for properties within a 15km radius of the Melbourne CBD, Harry believes you should budget for a 25% premium above the stated auction price.

The Estate Agents Act says that ‘the quoted price must be based on an estimate of the expected price the agent gives the vendor – either as a range (less than 15 per cent) or as a figure’.

That is based on what would be expected to be paid for the property by a “willing but not anxious buyer” in a normal market, says Real Estate Institute of Victoria CEO Enzo Raimondo. The reserve at which the vendor will sell does not have to be listed on the authority until just before the auction.

Mr Raimondo says there is no legal requirement that agents adjust the quote price unless they receive at least one written offer, with a 10 per cent deposit, that far exceeds the quote price. “Until the offer is in writing, there is no guarantee that the buyer is truly willing to pay that amount for the property.”

What Buyers Can Do:

• Understand that it’s the buyer interest that pushes up prices.
• Accept that agents err on the side of conservatism with their pricing to ensure a big crowd of bidders.
• Research recent sales of comparable properties to get a more accurate idea of what property is likely to sell for.
• Assume, but don’t expect, a 25 per cent mark-up on the advertised price. Sometimes a property sells for less than expected.
• Obtain a pre approved limit which is the maximum their mortgage broker has been able to arrange without putting financial strain on them BEFORE they attend the auction.  This will ensure that emotion does not tempt them to bid more than they where prepared to pay.

As one of largest debts that you will ever have in your life, your mortgage can be a great stress. Mortgages are debts that people have to live with for a large part of their life. So it’s obvious that you want the best mortgage deal possible. If you don’t feel that you currently have the best mortgage possible, then perhaps mortgage refinancing is the solution for you. Mortgage refinancing may offer a good opportunity to relieve the burden of debt and make your mortgage work better for you. However nobody makes decisions about their mortgage lightly. As a significant part of you financial well being, making changes to your mortgage will often cause you to have doubts:

• Am I doing the right thing?
• Is my mortgage going to be more expensive?
• Why am I even refinancing?

These doubts are legitimate and you should always make sure to consider all factors before refinancing your mortgage. Here are 5 points that can help you make a decision about refinancing.

Is your first mortgage the best possible deal?

It’s more than likely that your first mortgage will not be the best deal. Despite this most people stay with their first mortgage because of uncertainty, complacency or apathy. By not being a more informed consumer many of us miss out on better mortgage deals and wind up paying too much in interest and / or fees.

Even if your interest rate is competitive with the best buys in the marketplace, there could be other restrictions on the mortgage that are preventing you from extracting the best value from your loan facility. Once again it pays to be an informed consumer.

Other mortgage deals can give access to line-of-equity withdrawals, extra payments options, increased frequency payment options or even lump sum payments. Through mortgage refinancing it may be possible to give yourself an opportunity to obtain the best mortgage product available for your needs.

Explore all potential scenarios

For the best possible savings, mortgage refinancing requires you to keep your property for as long as possible. In reality your savings will not be that great if you sell your property in two years compared to ten years. To get a clearer picture of the savings you could make, calculate the cost of refinancing with these scenarios in mind:

• Keeping the house indefinitely
• Selling the house soon
• Selling the house in ten years
• Keeping the house as an investment property

These scenarios will each produce a different result and give you different savings. It’s important to consider the scenario that most relates to your situation. Only once you have explored these scenarios should you proceed with refinancing.

Prepare a Future budget

By budgeting for the future you can work out whether a mortgage refinancing deal will really save you money. In order to budget for the future in relation to your mortgage, you need to calculate the amount of interest you pay over the term of the mortgage and do the same with each potential mortgage refinancing product you are considering. You will find that some products may end up being more expensive and others cheaper for you. Only by doing this can you find which mortgage refinancing product is best for you.

Use this opportunity to cancel your other debt

Most of us have other debts to contend with as well as our mortgage. It is not uncommon for people to have credit cards with balances that add up to $5,000. Many refinanced loans can offer you the opportunity to eliminate this debt by consolidating it into your refinanced loan. This can potentially remove your high interest debt of 15-20% and above and turn it into low interest debt. The money you save every month on servicing that debt can be used to overpay your mortgage and reduce that debt by tens of thousands of dollars over the course of the term. Be mindful that you will be extending the term of the credit card debt so paying higher amounts to repay it early has definitely got to be a priority.

Calculate fees vs. Interest saved

Refinancing your mortgage can often result in fees of up to $5,000 or more; this discourages many people from refinancing. However in order to get a true picture of the savings you will be making you should compare the fees against the potential savings made from reduced interest. You will often find that the money saved from interest far outweighs any fees you might incur. Whilst you may pay fees initially, it is possible for you to make savings of tens of thousands of dollars.

Before you make any decisions about your mortgage you should take these factors into consideration. You might find that mortgage refinancing is the solution for you.

Be mindful of lenders or brokers encouraging you to refinance without asking you what outcomes you want, what your motivations to refinance are or bothering to get a good understanding of your personal and financial position. If their only interest seems to be to refinance you and only speak about ‘cheap interest rates, no fees’ but not about getting the outcome you are after - RUN!! These are not the people you should entrust your financial and lending matters to.

About the Author 

Harry Pontikis is the Director of Chocolate Home Loans. Harry and his team of mortgage brokers, specialise in residential, business and commercial loans Australia wide.

This article may be republished proving it remains fully intact including the author bio.

The question facing people now is whether they should borrow whatever they need to so they purchase their first home or whether or they should try to save for a deposit. The choices are:

Should I borrow it all and buy now?

Negatives:

• Usually higher interest rates
• Higher recurring fees and charges
• Much higher Lenders Mortgage Insurance
• No equity in your property and possibly negative equity if the market drops

Positives:

- Allows entry into the property market immediately
- Very difficult to pay rent and save for a deposit
- Negative equity not an issue unless you plan on selling in the short term
- Able to refinance to a more competitive loan once equity is built up over time

Conclusion:

It’s a personal choice. If you can afford the repayments of the mortgage, and owning a home is important to you, then the quicker you purchase a home, the better it is.

“My choice would be to jump in when the time is right for you - rather than trying to predict factors not within your control like the economy, interest rates, etc. I implore you to speak to your accountant and financial advisor for strategies relevant to your situation.”

Harry Pontikis
Director
Chocolate Money

What a great start to the new year if you are looking to buy your first home or investment property!  Prices have progressively been rising along Australia’s eastern seaboard and lenders are favoring borrowers who can verify their income and have stable employment.

If you are looking to buy your first home, want to stop paying rent or want to reduce your taxable income and purchase an investment property, I invite you to call us for an obligation free chat to discuss:

• Any general finance questions
• The maximum loan you can comfortably borrow
• What the monthly repayments would be
• The financial difference between rental payments and mortgage payments
• Any cash variance from rental income and mortgage repayments

It’s the perfect time to assess your options and consider getting into the property market - as it has been quite a while since properties have dropped in value and there are some wonderful loans currently available.

Tip 1.

Don’t pay ‘professional package’ annual fees, ranging from $340 - $390 every year for a slightly lower interest rate. Many loans exist which offer the same interest rates, similar features but without the annual fees. e.g. ING, Bankwest, Citibank, etc.

Tip 2.

If you are with a large bank, call us to ensure you are structured to receive the maximum discounts you are entitled to from that bank. Most people do not receive all discounts they may be eligible for from their existing lender.

Tip 3.

If your existing lender is looking shaky OR wants to exit the Residential lending market (e.g. Macquarie bank) OR has removed loan features due to funding issues, then it’s a great time to renegotiate the terms of your agreement and possibly have waived exit fees.

Tip 4.

Don’t cross securitise your properties with ANY lender as it removes flexibility and has numerous other ‘downsides’.

Tip 5.

Investigate the opportunities which now exist for your self managed superannuation fund to borrow and buy property.

Harry Pontikis

Chocolate Money
P:1300 137 539
M:0411 258 058
harry@chocolatemoney.com.au

If your in the market for a home loan, however your credit isn’t all that you would like for it to be, it’s important that you know that there is some hope. It won’t be as easy as someone with spotless credit of course, but it is possible.

There are some things that you can do to increase your chance - they are:

Find a property with built in equity. If you can find a home that already has equity, it may be much more simple to getting a loan on the property. To the lender, this could mean that you’ve already made some down payments on that property. You’ll have to consult a mortgage broker to see how this helps you.

Be creative in your financing. Maybe the seller will take a second mortgage on the property in fact. You can save a down payment by entering into a contract with the seller that you’ll make monthly payments with interest in lieu of a down payment.  This is actually sometimes referred to as a lease option.

These days there are a ton of lenders that will give you a one hundred percent financing, that is if you have a good credit score. However, paying a down payment will lower your interest rate significantly.

If it’s a timing concern, and you think that in a few months you’ll be able to have saved enough for a down payment, then it’s probably better to wait, if saving on your interest rate is important to you. This is good financial planning on your part since you’re planning ahead for a lower interest rate.

One thing to consider on that note however is that if it’s a mortgage that you feel you must take now, and that any amount of time is not going to help you, then the option of refinancing is always there for you down the road.

Don’t believe mortgage brokers when they tell you that they can’t do anything for you. You have to keep shopping for one that will, since some brokers are more flexible than others, due to good relationships that they have with the lenders directly.

One way to increase your chances is to go with an online service, that will submit your application to various lenders, basically letting them fight for your business, giving you a bit of an advantage. Even then however, your loan application can get turned down if your credit is that bad.

At this point it may be a good idea for you to take a good look at your problem, get credit counseling, and consolidate debt if necessary. It may hurt to wait for that loan, but will only be helping your future, instead of digging your hole even deeper.

About the author:
Jack Blacksmith writes essentially for http://www.debtania.com , a website on personal finance . His abstracts on negotiate debt settlement are published on http://www.debtania.com/negotiatesettlement.html.

Chocolate Money has access to many lenders and specialises in finding finance for people with credit issues, self employed, people unable to verify their income and most other non standard situations. Chocolate is able to facilitate high lending home loans, creative low documentation loans and very competitive credit impaired loans. As the exclusive supplier of finance to the Master Builders Association in Victoria, Chocolate Money focuses on providing options and solutions for the self employed as well as PAYG people.