let’s make the right move

With the potential to enjoy big savings off your monthly repayments and better loan features, it’s no wonder that close to 20,000 Australians refinance their mortgage every month, according to ABS statistics.

Home owner Tom Scahill reckons there are plenty of pluses in refinancing. A seasoned convert, Tom has refinanced twice in the last eight years and he’s on the road to refinancing once again.

When Tom first refinanced in 2003, he opted for a competitive 5-year fixed rate loan to shelter his budget from the subsequent upturn in interest rates.

By mid-2008, Tom had itchy feet again. With his fixed term about to end, Tom approached his broker, who tracked down a new variable rate loan offering a substantial saving off his monthly

repayments. Now, with the official cash rate at historical lows, Tom is thinking of refinancing a third time to take advantage of the current fixed rates.

“…getting the best deal”

While he acknowledges that “refinancing can involve some paperwork”, Tom believes it’s worth the effort. “It’s all about getting the best deal,” he reckons.

The prospect of interest savings is the key motive for around one in four refinances.

As a guide, refinancing a $250,000 home loan from a rate of 6.0% to another charging 5.75% could trim the total interest payment by as much as $11,400 over the course of the loan (provided the new loan is written over the same period as the remaining loan

continued on p2....

Winter / Spring 2009

On the road to refinancing

A window between July 1 and Sep 30 is open for FHB’s who buy or construct a new home to gain $32K in government grants.

These increased grants may help people overcome the strict new policies banks have introduced recently regarding deposit size and savings. While we are not normally big fans of these types of properties,for people with little or no deposit it could be the last

chance to get into the market for some time. With high rents it is hard to save the normal deposit required so if you fit into this category this could be a great opportunity to become a home owner. Mr R Crane from Cocoon R/E in Melb cautions that potential buyers of lower-cost city fringe developments should not expect quick growth in property values in areas with a high supply of property and limited amenities, but once amenities increase,growth may follow.

Be Quick to Secure $32,000 in First Home Owners Grants for New Homes

Mortgage Choice Limited302 Charman Road CHELTENHAM VIC 3192 Phone 03 9585 7779 Fax 03 8610 0365 www.mortgagechoice.com.au/cheltenham1

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OUR TEAM AT MORTGAGE CHOICE

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Mitch JonesPh: 03 9585 7779

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Investing in property interstate can allow you to take advantage of growth opportunities from new infrastructure projects or changing demographics, or simply the opportunity to turn your investment into a holiday home later.

But there can be problems with purchasing in a market that is unfamiliar and far away, particularly in terms of property inspections.

Thankfully, there are plenty of tools and services to minimise some of the legwork.

Firstly, each state has different legal requirements and fees for property transfer. For state specific information, look up the local State Revenue Office website, which provides a good overview of state property incentives and tax legislation.

When deciding where to buy, Robert Huxley from the website Next Hot Spot says a good starting point might be to look for new infrastructure that will generate jobs, such as a new freeway.

He then recommends looking at websites to gauge the style and price of properties available and speaking to local real estate agents.

“If you stick to the basic formula of doing the research, ringing around and sticking to where money is going to be spent and jobs created, then rents are likely to increase and property prices tend to follow,” Huxley says.

According to Dennis Kalofonos from Sydney Property Finders, it is important to purchase in an area with a steady rental income. Understanding the area’s unemployment figures and demographics will give an indication of the tenants the rental property will attract.

Local infrastructure, such as public transport, entertainment, schools and childcare, is also important to tenants and can be easily researched on the Internet.

“The neighbourhood is probably more important these days than the property itself,” Kalofonos says.

In our increasingly litigious society, landlords can’t afford to overlook their legal responsibility to provide a safe property.

From the moment you own your own property, you face the prospect of legal action in the event that anyone suffers an injury as a result of your negligence.

Taking out landlord insurance is a sensible precaution for all investors and most policies provide around $10 million in legal liability cover. Premiums vary widely; however, the cost can be claimed as a tax deduction.

Even with cover in place, landlords are still required to minimise the risk of injury to tenants and a few simple precautions can significantly improve the safety of an investment property.

As a starting point, a pre-purchase pest and building inspection is essential (expect to pay around $400). Following this up with an annual property inspection will allow you to identify problems at an early stage. Any repair work should always be carried out by licensed tradespeople.

Dealing with a reputable property manager, who responds promptly to a tenant’s request for repairs, will also help to minimise exposure to legal claims.

Tips for interstate buyers

Keeping it safe – landlord’s duty of care

let’s make the right move

....continued from p1

term being refinanced. Alternatively, you could extend the term to reduce your monthly repayments.) If your mortgage is larger, or the rate gap is even wider, the interest savings can be far more substantial.

A further 15% of home loans are refinanced as part of a debt consolidation. Folding a personal loan or credit card balance into a mortgage can make the repayments more manageable and may also provide big savings, especially for credit card debt which can attract interest charges as high as 20%; however, this will depend on a person’s individual circumstances and repayment ability.

Crunch the numbers

Along with the benefits, refinancing can involve costs. So before bailing out of your current loan, it’s essential to check that the numbers stack up. In addition to upfront fees imposed by the new lender, it’s worth enquiring about ‘exit’ fees, also known as ‘deferred establishment’ fees, charged by your current lender.

Frank Lopez, financial analyst with research group Canstar Cannex, says, “Exit fees are payable on around 80% of all mortgages, generally if you leave your loan within the first 3 to 5 years”.

Some lenders charge a fixed exit fee, and Lopez notes that “all the major banks charge between $700 and $1,000 if you exit during the first 3 to 4 years”. Other lenders charge a percentage of the outstanding loan or a multiple of monthly repayments, so this definitely something worth enquiring about.

Borrowers may also face additional Lenders Mortgage Insurance (LMI) charges if the value of their home has dropped, or the loan size has increased over 80% of the property’s market value.

Faced with a today’s wide choice of loans and lenders, a mortgage broker can provide a clear picture of whether refinancing will leave you better off and which loan is suitable for you. A simple home loan health check may be all it takes for your broker to confirm whether your current loan is still the best option for you.

In recent months, financial institutions have adopted a more cautious approach to their lending policies in a bid to safeguard their organisations and customers from deteriorating economic conditions.

The market is seeing a return to lending requirements not seen for many years - back to a time when a

home loan approval relied on an upfront deposit built from genuine savings in

some shape or form. Some financial institutions

are currently stipulating that borrowers must show

five per cent genuine savings for home loans when the loan-to-value ratio (LVR) - the percentage of the property’s value you’ll borrow - is over 80%. Others require that borrowers show genuine savings when the

LVR exceeds 85%.

Gone are the days when homebuyers could access loans for 100% or even 95% of the total purchase price. Today first home buyers cannot rely solely upon the First Home Owner Grant alone to use as a deposit.

For instance, someone borrowing $360,000 for their first property may be able to borrow up to 90% of the purchase price; however, the borrower would also need to contribute at least 5% of their own money, in addition to any money received from the First Home Owner Grant, plus any other state or territory based incentives into the loan, and the borrower will need to pay for additional costs related to the purchase, such as building inspections and solicitors, rather than use the loan amount to cover this.

Dave, who recently obtained a loan pre-approval to buy his first property in Sydney’s eastern suburbs, was able to borrow 90% of the property purchase price; however, he had to show evidence of genuine savings over at least a six month period.

“90% LVR was the magic number for us,” Dave explains. “Because we’d been thinking of buying for some time, we had been careful to put away some cash regularly every month for about the past year. This made the loan pre-approval process that little bit easier.”

If you’re concerned about how changing lending policies could potentially affect you, committing to a regular savings plan before buying is a great way to start. This will help prepare you for making regular mortgage repayments and illustrate to lenders that you are capable of sound financial management.

Toughened lending criteria and what it means for you

Thinking of updating your bathroom or replacing some tired fences? Perhaps you want to make some significant structural changes to better suit your home to your current lifestyle, such as installing a long-awaited walk-in wardrobe, decking or an extra room. If you’re keen to renovate, an equity loan could help bring your vision a step closer to reality.

Equity loans allow you to access the equity in your property for a range of purposes, including completing renovations. The potential loan amount accessible to you will depend on the amount of equity you have built up in your property. Your loan repayments will be increased to cover the expanded loan amount and stretched out over your remaining mortgage term.

A Queensland couple recently used an equity loan to breathe new life into their $635,000 home which they purchased in early 2008. Being able to access

$20,000 in equity allowed the couple to complete kitchen and bathroom makeovers and install new fences.

You should always conduct comprehensive research to determine which renovations

will add value to your property. It’s important to think further

ahead than the latest fad in housing or it could cost you in the long term. Borrowing a little extra now to complete some cost-effective renovations may be a great way to add value to your property in the long run.

Make your bricks and mortar go further

let’s make the right move

when you settle a New Mortgage with Mortgage Choice

let’s make the right move

Privacy: There will be occasions where we would like to send you valuable information directly related to property finance, as well as other related offers, tips and opportunities. However should you wish to receive only certain types of information or nothing at all, please contact your local franchise principal. Disclaimer: The content of this newsletter is written expressly for education purposes and is based on the opinions of the authors. The authors and agents for the authors are unable to accept any liability or responsibility whatsoever to any error or omission or any loss or damage of any kind sustained by a person or entity arising from the use of this information. It is recommended that you seek professional advice relevant to your specific circumstances before acting on the information based in this document.

WIN $5,000 CASH PROMOTION: To enter, either make an appointment with a Mortgage Choice consultant by calling 13 6678 or by filling out the entry form on www.mortgagechoice.com.au. Alternatively, if you are a Mortgage Choice client, complete the entry form in the Mortgage Choices Winter/Spring 2009 newsletter. The opening date of the competition is 30/07/09. All entries must be received by Mortgage Choice by 5pm AEST on 29/10/09. The draw will be held at 4pm AEST on 30/10/09 at the offices of Mortgage Choice. The name of the winner will be published in the Australian on 04/11/09. There will be 1 draw and the first valid entry will win. Complete terms and conditions and the privacy notice are available from www.MortgageChoice.com.au. The promoter is Mortgage Choice Ltd at Level 10, 100 Pacific Highway, North Sydney, NSW 2060. Authorised under NSW Permit No. [LTPS/09/04825] and ACT Permit No [TP 09/02043].

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Your chance to WIN $5000 cash

WINNER!Congratulations to the winner of the Summer/Autumn Escape on your dream holiday competition.

Ms C Shackle from Castle Hill has won $6,000 to spend at Flight Centre.

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State of the marketThe Melbourne property market is being driven by three factors: improved affordability, increasing population and the financial assistance being provided to first home buyers. 15 of the 20 top growth suburbs in Victoria for the quarter have a median price of under $500,000 shows the significant impact of the first home owner activity and has resulted in the strongest quarter for houses in four years.

The median house price for Melbourne decreased 3.1% over the March quarter 2009 compared to a decrease of 8.4% since the March quarter 2008.

Vacancy rate data show that the availability of rental homes in Melbourne remained stable, with a vacancy rate of 1.4% across the whole quarter. Inner city vacancy rates are the lowest with a rate of 1.2%. The vacancy rate in the middle suburbs improved slightly from 1.4% to 1.6% and improved from 1.2% to 1.4% in the outer suburbs.

There was very little change in the availability of rental accommodation in key regional Victorian centres. The vacancy rate increased by just 0.3% to 1.9% during the period.

Written by Real Estate Institute of Australia for Mortgage Choice

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To enter, all you need to do is confirm your current contact details and your communication preference and send it to with one of our loan consultants and you’re in the draw. It’s that easy.

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