INSIDE • Rental Treadmill • Buying off the plan • It’s your choice winner

Australians may have a reputation for enjoying a punt, but a spate of interest rate hikes over the last 18 months has seen many home owners take the gamble out of mortgage repayments by opting for a fixed rate loan. It’s a strategy that can pay off, but with interest rate movements notoriously unpredictable, it’s worth considering a range of alternate measures to take the sting out of rising rates.

The August 2007 rate hike – the fourth in little more than a year, hurt the hip pocket of anyone with a variable rate mortgage. Those who had seen the writing on the wall, and switched to a fixed rate, were able to shrug off news of higher rates. And not surprisingly, given our uncertain interest rate environment, there is a growing preference among home owners for fixed rate loans.

According to independent researcher – Cannex, around 25% of all residential home loans are now fixed, up from 17% in early 2006. Cannex analyst, Harry Senlitonga,

says, “Many people are using fixed mortgages to hedge against the uncertainty of further rate rises that they fear they won’t be able to service on a fixed income.” He also points to “A sharp rise in the use of fixed rate loans by property investors.”

Interestingly, Australia is one of only a handful of countries favouring variable rate mortgages. Cannex say the vast majority

of Americans lock in to a fixed rate, while across the Tasman, around 85% of New Zealanders fix their home loan.

The appeal of a variable rate mortgage lies in the prospect of lower repayments if market rates fall. However with the economy running at full steam and the Reserve Bank mindful of inflation, it could be that rates are more likely to trend up rather than down. That said, interest rate movements can take everyone by surprise - including the experts.

Fixing your home loan interest not only offers protection from rate rises, it also makes household budgeting easier. And if another rate hike is likely to put your household finances

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$6,000

choice!

Spring / Summer 2007 Newsletter

Fixed or

not?

Awarded to Mortgage Choice by Australian Banking and Finance Magazine

With the recent interest rate rise here are some simple but practical tips that can help save you money.

• Plan a clear budget and make sure you follow it. Try using a simple pocket sized budget calculator such as Spendtracker to help you.

• Review your household and vehicle insurance policies to see whether there are any savings to be made on the premiums. Buying on-line can often create savings.

• Instead of buying your lunch each day make your own instead.• Cut up your credit cards or pay them off in full each

month. Consider reducing your limits.• Combine multiple banks accounts to save on fees.• Put your tax return towards your mortgage instead of

spending it all.• Look for a more cost effective mobile plan and curb your

mobile calls.

MONEY SAVER TIPS FOR YOUR MORTGAGE

September sees Mortgage Choice proudly celebrating its 15-year anniversary, a milestone of success we are very proud of.

It is obvious the mortgage broker proposition is appealing to all participants when you look at our achievements during that short time – from the transition to nationwide to the 2004 Australian Stock Exchange listing to continually winning industry awards.

As at 30 June 2007, Mortgage Choice featured 445 franchises, 663 loan consultants, 213 retail outlets and around 100 corporate staff across Australia.

Mortgage Choice Limited302 Charman Road

CHELTENHAM VIC 3192 Phone 03 9585 7779

Fax 03 8610 0365 www.mortgagechoice.com.au/cheltenham1 This franchise is independently owned and

operated by The Finassist Partnership ABN 51 426 348 068

NEWS FROM MORTGAGE CHOICE

Anthony SmithPh: 9585 7779

Fax: 8610 0365Mob: 0413 439 761

anthony.smith@ mortgagechoice.

com.au

Gary Mackertichian Ph: 9585 7779

Fax: 8610 0365Mob: 0418 155 565 gary.mackertichian@

mortgagechoice.com.au

Mark BoultonPh: 03 9533 5340Fax: 03 8611 7915

Mob: 0403 047 147mark.boulton@

mortgagechoice.com.au

Chris HowittPh: 9333 4370Fax: 9333 4376

Mob: 0401 334 599chris.howitt@

mortgagechoice.com.au

Craig MicallefPh: 9308 9163Fax: 9308 9257

Mob: 0417 655 577craig.micallef@

mortgagechoice.com.au

Stephen ForresterPh: 03 9585 7779

Fax: 03 8610 0365Mob: 0409 250 347

stephen.forrester@ mortgagechoice.com.au

Jill O’Connor Ph: 9585 7779

Fax: 8610 0365 Mob: 0412 647 506

jill.oconnor@ mortgagechoice.com.au

Mitch JonesPh: 9585 7779

Fax: 8610 0365Mob: 0412 881 907

mitch.jones@ mortgagechoice.com.au

...continued from p1

under serious pressure, it may be worth fixing. Do think carefully about the fixed term though. The longer the period, the greater the likelihood market interest rates could swing significantly – either up or down.

Rather than fixing your entire loan, there is always the option of a ‘split’ loan. This provides an ‘each way bet’ providing both fixed and variable rate components.

To some extent however, the benefits of fixing may have passed. According to Cannex, the average 3-year fixed rate is currently around 7.70%, compared to an average variable rate of 7.59% . This being the case, it’s worth exploring other options to manage possible future rate hikes.

A good starting point is to take a close look at your current home loan to ensure you are getting the best possible deal. Refinancing to a cheaper loan can provide instant savings, though it pays to be on the look-out for exit fees. These typically apply in the first three to five years of the loan, and in some cases they can outweigh the savings made by changing to a cheaper loan.

It may be possible to free up extra cash for repayments simply by revisiting the household budget. Easing back on life’s little luxuries – termed ‘discretionary’ spending by economists, can be a simple way to boost repayments.

It’s also important to re-evaluate all your debts – not just the home loan. Even at current levels, mortgage interest rates are well below those charged on other forms of debt including personal loans and credit cards. Making it a priority to pay these off, or at least reduce the outstanding balance, will leave you less exposed to higher interest charges.

Finally, if future rate hikes threaten your ability to meet mortgage repayments, it’s worth approaching your lender to negotiate a manageable repayment plan. The best asset you have at this point is a healthy repayment history, so take action well before a payment falls due.

Renting a house or apartment is an exciting part of moving out of home, but over the years it can become a seemingly endless treadmill, as the money you’d rather be putting towards a deposit goes towards paying someone else’s loan.

But while high property prices can make owning your first home a seemingly impossible task, there are ways of making the process easier.

Traditionally lenders have wanted a deposit of around 20 percent of the property’s value, but 100 percent loans are becoming common. You’ll still need around 3 percent of the property’s value to cover legal costs, and lenders will require you to take out Lenders Mortgage Insurance to protect their risk. If you choose this option, then it is important to understand all the fees and charges and ensure you can manage your repayments without financial stress.

But saving for a home isn’t just about building up a deposit – lenders will also look for a good savings history to know that you’ll be able to pay off your loan regularly.

If you are saving for a deposit, you’ll need a plan. Paying off and cancelling credit cards is a priority, as they always impose a higher interest rate than you can make on any saved funds. Reducing your credit limit will also reduce your apparent risk in the eyes of the lenders.

Ideally you should be saving 10 percent of your pre-tax income, so analysing your spending will show you where your money goes and where you can cut back. That will help you to create a budget, but the best budget in the world won’t help you if you’re not disciplined. It might also be worth moving to

cheaper rental accommodation

to further boost your savings.

Setting your sights appropriately is also important. Your first home does not need to be your dream home, and simple renovations to a cheaper home can add substantial value when it comes to moving on to your next property. Looking in areas a little further out can also save you thousands.

And you don’t need to go it alone either. People are increasingly purchasing homes in conjunction with family members or even with friends. Some Lenders also offer guarantee schemes, whereby one family member may use equity in their home as additional security for a portion of another loan. Guarantors must be aware that they are limiting their own borrowing capacity until the loan is repaid.

The First Home Owner Grant provides a one-off payment of $7000 to owners that meet the eligibility criteria. For instance, you are not eligible if you are purchasing a building for investment purposes, or if you or a co-owner have owned a house before July 1 2000. These criteria and benefits can vary from state to state.

You may also be eligible for a professional package discount, which delivers a discounted interest rate in exchange for an annual fee and commitment to a credit card and banking account with the lender. Qualification for such a discount varies, but is usually tied to the size of the loan. The minimum qualification is usually $150,000, and lenders may discount up to 0.5 percent on a loan of $500,000.

Some lenders are also offering joint-equity loans, where the lender retains part of the ownership of the property and the subsequent proceeds, when it is eventually sold, while others will allow you to roll your HECS fees into your mortgage and pay them off together for an additional discount.

Ultimately, every lender has different products and criteria to determine whether you qualify for a loan, making it difficult to make comparisons on an apples-for-apples basis. Working with a home loan specialist can not only help you understand your own situation, but ease the burden in sifting through the range of lenders and products out there, and hopefully get you off the treadmill and have you owning your first home sooner.

Rental Treadmill

So a vacant piece of land has captured your attention and a ‘Home For Sale’ sign has been erected on the property’s border. While the foundations are yet to be poured, already you are thinking you have found the location you’ve always dreamed of. Now could be the time to consider buying off the plan.

But what exactly does ‘buying off the plan’ mean? Buying off the plan means that a purchaser buys the property before construction of the project has commenced so decisions are made upon scale models, strata plans and a scheduled list of finishes.

The question for many is why buy off the plan? Some people choose this purchase method because it allows people to secure a desired property within a specific development, according to Joel Hollis from Elders Real Estate in metropolitan NSW. And they may even be able to tailor finishes to their own taste.

Others favour buying off the plan because it allows people to secure a property without having to pay for it immediately: property buyers enjoy the peace of mind of having secured a property ahead of time, says the President of the Real Estate Institute of NSW, Cristine Castle.

“It allows people to buy at a convenient time – and at today’s prices,” Castle explained.

“Others may feel comfortable buying off the plan because they have

found a property that is being built by a builder they know and trust.

Buying off the plan is not for everyone, however. It demands the ability to read architectural plans and make significant decisions without seeing a property in the flesh,” Castle adds.

When buying off the plan it may be challenging for some to buy a property they cannot inspect, too. “Some people prefer to see, feel and touch things… others can look at architectural plans and be comfortable in their decision-making based on those plans,” she said. “For others it can prove to be a very foreign experience,” added Castle.

The purchaser cannot see what the property looks like, the quality of the finishes, the layout, the property’s physical size and dimensions or the property’s view or even the outlook.

Like any property purchase there are always pros and cons to be considered.

When buying off the plan there have been cases where buyers haven’t necessarily been delivered what they were promised – such as different sized living spaces, different finishes and so on, according to Joel Hollis – and some projects may experience time delays, he said. These are all factors to consider when buying off the plan. Certainly, buying off the plan is not a decision that should be made without conducting thorough research because you are entering into a contract to buy a property without having first been able to view and assess the finished product.

Be aware too that a valuation “off the plan” may differ substantially from the estimated value at completion

Checklist when buying off the plan:

• Research, research, research. Investigate past developments built by the developer you have chosen.

• Make sure you have a clear understanding and documentation of all aspects of the property you are buying such as room sizes, finishes and materials.

• Secure a full list of pre-agreed finishes along with a comprehensive understanding of recent sales/comparable sales and projected rental returns. Get the complete picture.

• Get a third party involved to help you read and clarify all the details of the plan… the process is all about attention to detail.

• When buying off the plan, the date for completing the contract is usually not until the building is finished and the strata plan is registered. The buyer usually pays a deposit and the balance is paid at the time of settlement once the building has been completed.

• Closely check the conditions of the contract. Seek legal advice on the benefits or restrictions provided by the terms of the contract. For example, consideration should be given as to whether there are any penalties for withdrawing from the contract. Other questions worth considering may be: Can I make changes to the finishes in the kitchen and bathroom? Can I select appliances (ovens and dishwashers) and items such as floor and wall tiles? Can I visit the site during construction?

Always read your contract and seek appropriate legal and other advice before signing documents or making payments.

Congratulations to the winner of the Winter/Spring 2007 Mortgage Choice It’s Your Choice promotion.

Jenny Tucker from Oaklands Park in SA, has won $6,000.W

INN

ER

Planning to buy off the plan

That’s all the time we need to show you how to get the real savings you want on your mortgage.

With a Free Mortgage Choice Home Loan Health Check, your local Mortgage Choice consultant can help you find out if your current home loan is the most suitable one available or if there are other products out there that better address your specific needs. With the backing of Australia’s leading mortgage broker - you’re in safe hands.

• Wide choice: We have many of Australia’s leading banks and lenders on our panel

• Professional home loan advice

• Local knowledge: We’re Australia’s leading mortgage broker because we combine local knowledge with over 14 years experience

• Fax it to: (02) 9954 4913 or

• Mail it to: Reply Paid 74789, Mortgage Choice It’s Your Choice Promotion, McMahons Point NSW 2060

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THE “IT’S YOUR CHOICE” PROMOTION: Call 1800 110 170 to make an appointment with a Mortgage Choice consultant and once you’ve attended that appointment you’ll automatically go in the draw to win $6,000. There will be 1 draw and the first valid entry will win. Winners will be notified by telephone and confirmed by mail. The opening day of the competition is 30th October 2007. All entries must be received by Mortgage Choice at the above address by 12pm Eastern Standard Time on 29th January 2008. The draw will be held at 4pm Eastern Standard Time for the first draw on 30th January 2008 at the office of Mortgage Choice. The name of the winner will be published in The Australian on the 2nd February 2008. *Complete Terms and Conditions and the privacy notice are available from your local Mortgage Choice consultant or by logging onto the Mortgage Choice website at: www.mortgagechoice.com.au. Authorised under NSW Permit No, [LTPS/07/25638], A.C.T. Permit No. [TP 07/03823], VIC Permit No, [07/3968], and S.A. Permit No. [T07/4018].

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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.

STATE OF THE MARKETThe June quarter saw the strongest growth in the residential market since 2000 with a 10.2% increase in Melbourne’s median house price. Price growth was concentrated in the inner city suburbs where the median price grew by 14% to $650,000.

The other dwelling market showed strong growth as well. Median prices for other dwellings grew 8.8%, reaching a high of $350,000. Unlike the market for houses, there was more consistent growth across greater Melbourne, with inner city prices growing by 8.8% to reach a median of $397,000, the middle suburbs by 5.4% to reach $315,000, and outer Melbourne by 6.7% to reach a high of $240,000.

Solid demand is also evident for property in many of Victoria’s regional centres. Geelong had the most expensive median price of $310,000 and growth of 5.3% in the quarter. Ballarat’s median price reached $227,500 increasing by 7.1% over the quarter. Bendigo’s median reached $232,500 increasing by 1.1%.Written by Real Estate Institute of Australia for Mortgage Choice

Simply call 1800 110 170 to make an appointment with one of our consultants and request to be entered into the draw.

8 Tips on how to reduce theft during an

open home:

1. Ensure that you have at least two real estate agents present.

2. Ask all viewers to fill out a sign-in sheet with their identification and contact details.

3. A real estate agent should monitor the back and front door at all times

4. Secure and hide all valuables.

5. Reduce the clutter in and around your house.

6. Store all your personal documentation e.g. bank statements, credit cards, passports.

7. Store all your valuables and fragile belongings away.

8. Ensure your public liability insurance is up to date.

Mortgage Choice Limited 302 Charman Road CHELTENHAM VIC 3192 Phone 03 9585 7779 Fax 03 8610 0365 www.mortgagechoice.com.au/cheltenham1 This franchise is independently owned and operated by The Finassist Partnership ABN 51 426 348 068

Call now on 1800 110 170 or fill in your name and contact details below and