Mortgages and Home Loans: October 2013

Saturday, October 19, 2013

The effect of Carbon tax on new homebuyers

There are fears that the housing market will suffer as a result of the introduction of carbon tax as first-home buyers are less likely to think about buying a property.

From July 1 2012 the cost of carbon will increase to $23 per tonne, and continue to rise by 2.5 per cent per year.

This growing cost of living, estimated at 0.7 per cent, is a consequence of the nation’s top 500 polluters passing on to the public their own increasing costs as they are forced to pay for the carbon dioxide they emit.

Taking into consideration the new carbon tax, the cost of an average residential property could increase by about $5,000-$6,000.

This could make it very hard for new homebuyers to get into the market as the new home buying public is already having to increase the energy efficiency of their homes as they are being built.

Many say that carbon tax doesn’t compensate the small businesses in the new housing market for the increased cost in their energy supply, particularly those that are manufacturing and not trade-exposed industries.

This has led to fears that jobs will dwindle, especially in the manufacturing and construction departments of the industry which include many workers overseas on 457 visas.

The longer-term impact on the industry could be the fact that those workers cannot be attracted back into the market place, with the result that the workforce is diminished permanently. Builders are concerned that from this there could arise an under build situation across Australia with a potential lack of new housing to meet the rental needs of the state and an increase to the cost of housing in the future.

It is thought that job losses could begin as early as January when the building companies begin factoring in the coming increases.

Rise in home loans signal recovery

The housing market appears to be recovering with a 4.4 per cent increase in home loans in May, following the sluggish movement earlier in the year as a result of the rate increase in November.

The number of approved home loans in May went up 4.4 per cent to a seasonally adjusted 49,437, according to official data. Economists had predicted a 4.5 per cent increase in housing finance commitments for the month.

The total housing finance by value increased by 2.9 per cent in May, which would amount to a seasonally adjusted $20.497 billion.

Many hope that the figure in May show some positive improvement after a depressing decline in the early months of 2011, with the numbers suggesting that investors were returning to the market after months of inactivity earlier in the year.

Bank lending was at its highest in about two years, implying that recovery from the global financial crisis is imminent.

Recovery was also seen at refinancing with competition between banks making it attractive for mortgage holders to refinance.

The second consecutive month showing improvement lends support to the belief that the economy is on its way to recovery, following the slowdown in the first quarter.

The consensus view was that the soft patch in economic growth was more fundamental than structural but many now feel that these figures are evidence to the contrary.

Home Loan comparison

Whilst the housing sector was in decline at the end of 2011, further rate cuts this year may prove extremely helpful.
Many economists and commentators believe that by dropping the interest rates further, the Reserve Bank of Australia (RBA) will be giving the housing sector the jump start it needs.

Shadow treasurer Joe Hockey said this week that the RBA should do most of the heavy lifting in order to boost the local economy during this time of global economic uncertainty. “I think the Reserve Bank has the capacity to do much of the initial heavy lifting and to stimulate economic growth by reducing interest rates,” Mr Hockey said.

For Australians looking to buy a property in the coming months, it is of paramount importance that they understand the various home loan options and features available to them.

Standard Variable Rate Home Loans
This type of home loan allows you some flexibility in your repayments as the loan rate is connected to the interest rate set by the RBA. If interest rates are cut you pay less on your home loan. However your repayments will also rise when the official interest rate rises.

Fixed Rate Home Loans
Fixed interest rates give you fixed loan repayments. This loan gives you the security of a constant interest rate giving you the ability to budget your future spending. However, this type of loan is very rigid, allowing only limited additional payments and applying some penalties for early payouts of the loan.

Split Rate Home Loans
This type of home loan gives you the best of both worlds where one portion of the loan is fixed and the other is variable. This loan gives you the freedom to take advantage of the various features that the different home loans have to offer. This home loan is also very rigid and allows limited additional payments.
There are a number of features that if added to your home loan may prove to be of great value to you.

An offset facility can help you pay off your loan faster. An offset account functions like a regular savings account, where the balance of the account is offset against that owing on your mortgage. This option can help you pay off your loan sooner as well as to build up equity in your home.

A redraw facility feature in your home loan allows you to make additional repayments into your loan account and if need be access these funds in the future. This is one of the most widely used loan features on the market and one that is offered with most home loan products.

It is important to consider all your options when choosing your home loan as making the

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Friday, October 18, 2013

Rift between Mortgage and Interest Rates.

The difference between mortgage rates and official interest rates is at its greatest in 18 years after an unexpected move by many of the major banks. With many banks raising mortgage rates this month, the average standard variable mortgage rate is at 7.4 per cent which is 3.15 percentage points higher than the current RBA interest rate.

Analysts warn that banks are likely to continue increasing mortgage rates in order to boost profitability despite the fact that funding pressures have eased in recent weeks. With the current rift between mortgage and cash rates growing, it is extremely important for those intent on buying a home, choose a good loan.

Choosing a home loan that fits your financial situation will save you money, and make the process of paying it off far less stressful. When looking for a home loan, many Australians are turning to mortgage brokers for aid and advice.

A mortgage broker uses his expertise to quickly and efficiently find you a great loan. However, with the range of brokers out there it is important to choose carefully.

Tips to Choosing a Mortgage Broker

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What’s worse than a visit to the dentist?

It’s winter and most of us are not at maximum enthusiasm. On top of this it’s tax season. To make matters worse you have received a letter from the ATO advising they will be conducting an audit of your tax affairs. For many this is a daunting task and dare I say it; even a visit to the dentist is looking better. With an increasing number of ATO audits it is imperative that as a property investor we prepare ourselves for an easy passage which can be achieved by following a few simple steps.

Audit Insurance. A relatively inexpensive policy can at least assist with the costs of an audit.Ensure that the name on the property contract (and therefore title deed) is the same as on the loan documents. The primary information is the title deed and if the loan is in different names then additional paperwork in the form of an On Loan Agreement maybe required to substantiate the interest deductibility to the ATO.Ensure all rents and property expenses pass through the bank account in the same name as the property title deedYour depreciation schedule must be prepared by a quantity surveyorIf a renovation has been completed you should have a properly prepared scraping schedule to allow you to write off the value of the items you throw away.All repairs and maintenance costs must be fully justified and you need to ensure that any costs which should be of a capital nature are depreciated and not expensed. This can be tricky and a repair to the kitchen cabinets prior to the property being rented is deemed capital while the same repair during a rental period could be a repair.Ensure all your records are easily accessible. The use of a rental agent can assist as they should be authorized to pay all expenses (other than interest) and receive all rents. They will send you a monthly and annual summary with all supporting documents attached.If you are using a trust you need to ensure that the trust has been correctly written and operated especially if as an individual you are claiming negative gearing. Remember not all trusts are the same and many do not allow the taxpayer to claim negative gearing which the Chan & Naylor Property Investor Trust

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Thursday, October 17, 2013

Home Loan Terminology

Some people believe that buying a home in Australia or anywhere else in the world is too risky right now given the current world economic situation. However, this doesn’t mean that it is impossible to get a good deal on a new home or home loan, especially considering the fact that Australia’s economy has continued to grow, albeit at slower rate.

Still, buying a home can be a tricky ordeal, especially if you’ve never bought a home before. There are real estate agents, banks, mortgage brokers, lawyers, and contracts to deal with, and the whole process has its own unique set of terminology that needs to be used and understood by all involved parties. Therefore, it is quite important that a potential homebuyer familiarizes themselves with home buying and to get the best deal possible.

One of the first terms you will probably hear is valuation. Valuation is what a professional appraisal firm has decided the property is worth. Still, this doesn’t mean that you will actually be paying this price, as the asking price may be higher or lower than the valuation.

When you’ve settled on a price, another thing that you must consider is exactly how much extra money you will be paying in terms of taxes. There will always be the requisite title fees, which are charged by the state or territorial government for various tasks and documents, such as new mortgage registration, title searches, and transfer of property ownership. The title fees are usually quite minimal in comparison with the stamp duty that you will be required to pay for the property.

Stamp duty is a tax levied on a newly purchased property by the state or territorial government. The amount you will be required to pay in stamp duty depends on both the purchase price of the property and which state or territory the property is in, as each charges a different amount or percentage.

Once you have completed the purchase of your new home, the final step is property transfer. This entitles filling out at a document with the Titles Office that confirms that the property has changed hands. Once this is complete, you will finally have your title deed that documents the property and states you own it.

If you have purchased a townhome or other housing unit within a larger building, you will only receive a strata title, which states that you own your particular unit but share all common areas with the rest of the owners within the same strata. Of course no matter what type of property you purchase, if you have a home loan or mortgage, the bank will hold onto the Certificate of Title for safekeeping until the loan has been fully repaid.

If you have any questions or wish to speak to an eChoice consultant- leave your details here and we will call you!

Tags: Home, home loan, , interest rates, mortgage, properties, property, stamp duty, valuation

Getting the ‘Real Picture’ is Vital to Securing a Better Home Loan Deal

eChoice, Australia’s leading online brokerage is predicting an increase in the number of home loan refinancers, as borrowers returning from the festive season will be financially hung-over, carrying over more credit card debt into the new year.

Borrowers are warned to take their time and seek accurate financial advice when starting the refinancing process as there are many other lenders who can offer competitive lending rates and packages, which are below the standard variable rate. A

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