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What is Mortgage Insurance?

August 21, 2011 By Leave a Comment

Today I am going to write a quick section with the intent of dispelling the fallacy that many people have about lenders mortgage insurance.

You may have heard the term Lenders Mortgage Insurance (LMI) or even paid it yourself when taking out a loan at one stage or another – but do you actually know what it is?

So what is it you ask?

LMI is a form of insurance you pay (a one time fee) to a lender ( in addition to the loan amount you are applying for). Whilst it is not a legal requirement, it is a requirement of most lenders if you are borrowing greater than 80% of the value of your residential property. The price is generally higher the higher your Loan to Value (LVR) is.

So who does it insure?

LMI insures the lender. One common misconception is that it covers ’you’ the borrower in case you default, which is untrue. It is actually a form of insurance for the “lender” to cover the higher risk of lending you are requesting. Essentially it is the lender charging you a premium for them to minimise their exposure to lending at such leverage.

Whilst this may sound like a bad thing – for the most part it isn’t. LMI can allow you to buy that property you were after sooner, and with less of a deposit than you thought possible. Yes it can cost a bit more upfront (unless you capitalise the LMI onto the loan) – but it is a fact of lending in todays market, and you just have to realize the additional costs if you are looking to borrow over 80% from one of Australia’s lenders.

Filed Under: Purchasing hints and tips Tagged With: , , , , ,

Fixed rates on the down low

August 21, 2011 By Leave a Comment

In the last 2 weeks all major banks cut their fixed rates on standard lending products quite significantly (some by up to 0.6%!). This means the fixed rates on average are now lower than the discounted variable rates. Variable rates move up or down dependant on the RBA’s official cash rate.

What does this mean for us Tom and Jane buyers and investors?

Whilst variable rates are generally the most favourably utilised amongst borrowers, this is certainly a possible opportunity for those of you who wish to have some certainty on your repayments. There are a number of ways you can structure your loans and I do advocate fixed term options for the risk adverse investor.

For others, this could be a sign that the cash rate is expected to drop over the coming 3-18 months – which means the variable rate will drop alongside.

Regardless of your school of thought, I believe the RBA will wait until they witness some clarity in the local market and form an opinion on our own inflation expectations.

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Will they or won’t they? An Interest Rate Story

August 21, 2011 By Leave a Comment

Unless you have been stuck under the covers the last couple of weeks, you would have seen the media frenzy surrounding the financial markets roller coaster that has hit both the local and international market.

This in turn has led to a lot of speculation on whether the RBA “will or won’t” drop the cash rate in their next meeting to counter the confidence levels in the industry at the moment (they next on 5th September). As many know, any drop in the cash rate generally means lenders passing on the discounted rate to a consumer (which is what every property owner wants!).

I do find it quite interesting considering just a couple of months back, a lot of analysts estimated several rate hikes by the end of the year – but I guess that’s the whole nature of guestimates.

Based on the current market, I do think it’s fair to say there won’t be any rate hikes in the short-mid term – or as many economists believe in the foreseeable future.

Regardless, you can form your own opinion – but my advice is to keep at paying off your existing mortgages and working to build your investment portfolio as best you know how. There is nothing you can do to control the market anyway, but you certainly can manage your own portfolio for long term growth.

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Need a Home? It’s Time to go Shopping!

July 14, 2011 By Leave a Comment

I have pulled together my July Top Tips for you to keep in mind when you go out shopping for your home:

  • Be a Smart Buyer

Need some tips for shopping for a home?An informed buyer is a smart one. There are numerous resources available to you through the internet. Realestate, Domain, RPData and even the ABS are fantastic sources of information on the property or area you are looking to buy in.Know

  • What You Can Offer

There is no greater feeling than finding the house of your dreams after you have been shopping around for months (or what might feel like years!). You put your offer down, and it has been accepted by the vendor! and now you just need to sort out the finance.. right? To avoid the horrible feeling that you have overestimated your spending capability and won’t get approved by a bank for what you offered to pay – make sure you find out your borrowing capacity and obtain pre-approval before you offer.

  • Get Your Inspections Sorted

This might sound simple, but it still surprises me that many people don’t get (at least) a pest and building inspection done on a property. Most buyers would spend several hundred dollars getting a 10 thousand dollar car inspected – so why wouldn’t you do the same with a purchase worth hundreds of thousands? It’s always better to know what you are in for – than find out the hard

  • Know Your Settlement Date

I feel a little silly putting this tip in – but problems occur from this too often for me not to. Especially if you are moving out and need to leave your own home as a vacant possession – you need to plan for when you are able to move in or make final payment. It’s equally important to note the date on the contract of sale specifies a number of “days” till settlement. One common mistake is to think this is from the end of the cooling off period – but it’s actually from the day both parties signed/exchange.

  • Do your final walk through

Pretty straight forward – but I recommend you make sure this happens. There may be something you missed or you notice a contract inclusion that isn’t physically there anymore.

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The End of Exit Fees?

May 26, 2011 By Leave a Comment

Well after all the build-up, it seems to have finally happened. As of 23rd March 2011 – the Australian Government approved the abolition of exit fees.

The intent of abolishing these “Deferred Establishment Fees” (or DEF’s), is to give  Aussie home owners the ability to refinance their mortgage with their existing lender without incurring any unnecessary “break” fees for doing so. Whilst this regulation won’t apply to all mortgage contracts (such as consumers under “fixed rate” agreements) it is likely to have a significant impact on the industry – with some current exit arrangements costing Australians the likes of up to $7000.

The regulation will apply to new loans commissioned after July 1, 2011. So you if you are looking to refinance or pay out your current loan– we still strongly recommend you know your exit terms by talking to your current lender.

Filed Under: Latest Home Loan News Tagged With: ,

Save The Embarrassment – Get Your Pre-Approval today!

May 26, 2011 By Leave a Comment

There is nothing worse than committing to a contract on your new home or investment and finding out later that a lender rejected your loan. This could be for a number of reasons, possibly:

  • You are unable to service the requested loan amount
  • You don’t have enough of a deposit to cover the loan
  • Or a number of other reasons

 

This is why obtaining a pre-approval is a necessity!

 

It doesn’t cost you a cent, but on the flipside can provide the following:

 

  • You to organise your loan structure beforehand
  • Provide the confidence for the amount you can borrow
  • Puts you only a step away from an unconditional approval
  • Gives you the luxury of time

 

I always recommend my clients obtain a pre-approval (especially!) before making an offer on a property in writing. As said, it’s a necessity. Not only will it provide you confidence in your buying limit, but it safeguards you – maybe from making a hasty decision on that house you have been eyeing or the mistake of a “too high” bid at auction.

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The Power of Depreciation

May 26, 2011 By Leave a Comment

Any investor needs to know how depreciation may or may not affect their investment portfolio and any potential benefits that may apply. Not knowing can cost you thousands of dollars in unclaimed and undepreciated assets. It can even mean the difference between a negatively geared property and a positively geared one.

 

Obtaining a Tax Depreciation Schedule (TDS) can provide assistance in maintaining out of pocket expenses and even sometimes offset a negatively geared property enough to turn into a positively geared one.

 

One common misconception is that you only need to obtain depreciation schedule when you have a new property. Whilst it may be true that the younger the asset, the higher its depreciation ratio is, there is generally value in obtaining a schedule for properties aged even over 20 years of age (e.g. ovens, stoves, certain fixtures)

 

Whenever we have a new investment property buyer, one of the first things we recommend is that they obtain an independent party to arrange a depreciation schedule. The majority of the time, they will make the costs of the schedule back with their first tax return.

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He was a remarkably helpful and knowledgeable

May 26, 2011 By Leave a Comment

I am happy to recommend John of Mortgage Matters as an incredibly able guide and problem-solver when it comes to this complicated business. He was a remarkably helpful and knowledgeable investment partner throughout the entire process.  He responded to my questions quickly and made what I thought was a long and difficult process quite simple. The home loan structure and strategies were refreshing. I didn’t just feel like another number to this firm. I am confident in passing his name along to others.

 

Nadine Horton, Kellyville NSW

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It was fantastically simple

May 26, 2011 By Leave a Comment

John managed the investment structure for my recent refinance and was able to help me extract the maximum equity in my property without it costing me a cent. It was fantastically simple. Not only has the change saved me money, but it has set me up for purchasing another property much sooner than I realised possible!

 

The post settlement support was also great – John went out of his way to help me sort out an issue in dealing with my old lender, which saved me over 4k in unrealised and overcharged fees!

 

Thanks John!

 

Ramesh Bhardwaj, North St Mary’s NSW

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Mortgage Matters is AMAZING!

May 26, 2011 By Leave a Comment

“Mortgage Matters is AMAZING! John’s knowledge and expertise is second to none. He helped my wife and I obtain our first home loan with ease and assurance. He was with us every step of the way and was there to answer all questions however simple or complex. I will definitely be using Mortgage Matters again when looking for our next property and already have referred friends and family.”

 

Bryson Mohan, Merrylands NSW

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