Perfect time to a pay little extra on the mortgage

Savings thumb Perfect time to a pay little extra on the mortgage

Paying a little extra on your home loan? Perhaps you should consider it. Record low interest rates are giving Australian home owners the best opportunity in decades to get ahead on mortgage payments, for those who have funds available.

According to Smartline Personal Mortgage Advisers, paying an extra $100 a week on the average mortgage could deliver interest savings of more than $115,000 over the life of the loan.

“With the recent RBA decision to hold the cash rate at 2.5% again, current interest rate levels represent enormous savings to borrowers,”said Smartline’s Executive Director Joe Sirianni.

“Consequently, there has not been a better time to make additional repayments on your mortgage for 20 years. It very much highlights the concept of spending money to make money.”

Low interest rates absorb less of a mortgage repayment, freeing up more of the money you’re paying onto your property to be applied to your principal debt.

A $300,000 mortgage at 5% would be paid off your home loan 11 years faster, saving $115,000 in interest, with an extra $100 a week over the minimum repayment.

“There’s no doubt that now is the time to pay down debt more aggressively,” Mr Sirianni said.

“Now is the time for those with a home loan to be making hay while the sun shines.”

Remember that the impact of repayments comes down to the structure of your loans and your individual financial situation. Talk to the professionals and ask how applying some extra money – if you have it to spare – can help you reduce the debt on your home loan.

Story:   Venessa Paech     Source:

tt twitter micro3 Perfect time to a pay little extra on the mortgage

Investing in property should be about making money

Investing and making money thumb Investing in property should be about making money

The media is full of property stories about how auction clearance rates in the big cites are moving from strong to silly. Frustrated buyers are losing out and sellers are rubbing their hands together in financial glee. I’m hearing of stories of buyers neglecting their due diligence because they just don’t have time.

Buildings and pest inspections, for example, are the first to go by the wayside. Some people are even signing on the dotted line without seeing the home. There’s nothing new in this, of course; it’s all been done before when the market was busy. The thing to understand is that it’s a high-risk strategy and not for the amateur.

Cutting corners to secure the home before anyone else is dangerous. And here’s an important tip: Buying a property is not a race. While it is not boom time everywhere, for many buyers wanting to buy a new home or invest in established areas, is becoming rather tainted.

Buying a home should be an exciting challenge where the results are clearly worth all the effort. From what I can gather right now that clearly is not the case for very many, so here are a few pointers.

What is a boom? Usually and thankfully booms happen and are over in a short time. When supply is low, demand is high, the media realises and starts discussing it loudly, all combined with low interest rates: Boom!

This typically occurs in areas where limited land is available for further development, or what is being built or planned is not the primary housing demand stock. For example, in urban areas, developers may be building stunning luxury units, but the older, established units are cheaper per square metre and have lower strata fees and so are selling like proverbial hot cakes.

In these conditions, investors should be aware they are likely to be buying at the top of the cycle — and there are no deals here, just market value and a bit more for luck! This is fine if you can see very long term and the figures stack up, but if they don’t — never get carried away with the hyperbole —— property investing should be about making money, not your own emotions, a desire to win at auction or following the crowd.

First homebuyers have two options. The first is to give in and let things calm down. It will — it always does. The price you pay later may be a bit more — that’s always the risk — but just as equally, it might not be and you may have saved more money towards your deposit, too. The second option is to keep going but always ensure you choose a home you really like. The property should be good for you long term — one that can be rented to a value to cover your home loan if you need to move on before the value gain or purchase price has been covered.

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Property prices to keep rising

property prices no 2 thumb Property prices to keep rising

House prices are tipped to continue their upward growth nationally during the next two years.

Queensland is predicted to show the biggest gains within the next one to two years, according to the latest NAB Residential Property survey.

The report also found foreign buying activity had picked up for new properties, particularly in Queensland and for established housing in New South Wales.

Foreign buyers now accounted for just over 1 in 7 new properties and around 1 in 10 established homes.

The outlook for house prices in the next year (to March 2014) improved in all states.

Queensland is expected to undergo the fastest growth in values of 3.5 per cent and New South Wales 3.3 per cent.

Growth will be more subdued in Victoria, South Australia and the Northern Territory where it is predicted to increase to just 2.2 per cent.

On a capital city basis values are predicted to rise by 6.4 per cent in Brisbane in the year to March 2015.

Perth will also be a strong performer with values tipped to rise 5.6 per cent during the same period.

Suburbs tipped to enjoy above average capital growth over the next year are:

Queensland: Brisbane CBD, Broadbeach, Redcliffe, Toowoomba, Warana.

Western Australia: Armadale, Australind, Cockburn, Joondalup, Mandurah, Perth CBD, Woodlands.

New South Wales: Annandale, Blacktown, Campbelltown, Double Bay, Liverpool, Marrickville,

Newtown, Parramatta, Penrith, Rouse Hill.

Victoria: Carlton, Docklands, Flemington, Footscray, Frankston, Glen Waverley, Hastings, North Melbourne, Reservoir, Scoresby, South Yarra, Tarneit, Thornbury.

Tasmania: Hobart, Kingston.

South Australia: Norwood.

Story:  Michelle Hele      Source:

tt twitter micro3 Property prices to keep rising

Beware the hidden costs of trading up the property ladder

Trading up thumb Beware the hidden costs of trading up the property ladder

Trading up is one of the best reasons to move house. This should be the fun one, the exciting one, the time in your life for the big change that should be about enhancing and improving your day-to-day family life. It could be the next step on the proverbial property ladder or might be the decision to move into your “forever home”.

There are two primary motivations for trading up. First, it can be about upgrading your living environment.

That might mean moving to a nicer area, increasing your living space, getting a bigger block for the kids to run around in, a new home or a chance to live in a period property.

Second is the investment component. If you live in a $500,000 home and its value increases 10 per cent over a period of time, that is $50,000, of course.

But stepping up a level means those profits percentages become even larger. If your new home is worth $750,000, then with 10 per cent growth you have now earned an $25,000 on top of the $50,000.

Both these reasons can make excellent long-term financial sense as well as being emotionally fulfilling.

But in today’s market there are a few points to be aware of before you decide to trade up.

First of all, don’t forget the 20 per cent deposit rule. Ideally you should have this — or more — to move up the ladder. You may have 20 per cent equity in your current home but unless you have cash to add to it this, it will not be enough.

You could still make the move but I would use this as a financial indicator that you may be stretching yourself because it will mean you also have to pay expensive lender’s mortgage insurance.

Second, don’t forget to allow for stamp duty, the. Stamp duty is the absolute horror housing tax. There are no incentives or exemptions for you now you are a seasoned homeowner and not a first timer anymore!

Third, factor in real estate and marketing costs.  Again, these can vary but certainly are more than likely to be in the tens of thousands.

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Valuations: Five must know facts

valuations thumb Valuations: Five must know facts

Valuations are at the heart of property investment – particularly when it comes to getting finance, or being refinanced, with a lender.

You might also just be asking ‘What is my home worth?’ and a valuation may appear to be the natural way to answer this question.

There are also many reasons why you’d want to get an independent valuation – observer Cameron McEvoy aptly describes five crucial reasons you’d consider this – and so it pays to be aware of what is involved.

Here are five ‘must know’ elements of valuations:

1) It’s not an appraisal

You may have had an appraisal with a real estate agent, and now believe that your home can fetch in excess of $630,000 on the current market. This may be the case, however a real estate agent’s appraisal is not a valuation, and will not be accepted by the bank as such.

While most real estate agents act with professionalism, investors must be aware that it’s not unheard of for real estate agents to alter the appraisal they provide you to match your expectations, and to be fairly bullish with their appraisals to secure a listing.

A valuer, however, is immune to these pressures, tasked with one job and one job alone – valuing your home.

2) They’re not an exact science

It will be of no surprise to any savvy investor that figuring out the price of a property is never an exact science, even for those trained in the valuation field. Similarly, obtaining two different valuations also isn’t an unheard of occurrence, and is the reason many investors will head to a different bank to obtain financing, particularly after a renovation.

Observer Mark Armstrong refers to bank valuations as being ‘murky waters’. “Remember if a valuation comes in too high and the bank loses money on the loan then the valuer maybe legally liable,” he notes, which may suggest why there is also a general impression in real estate that valuers are conservative with their estimates.

Similarly, it has been pointed out time and time again, such as by Mal James in this article, that valuers are subjective. This is because they are human beings, and they act with the information provided and their knowledge to come up with the best possible response.

3) There are multiple types of valuation

While we’re focusing on a fairly rigorous in-person valuation, there are a number of different types of valuations. From the DIY desktop valuation (which have varying results of accuracy), to the ‘kerbside’ drive by valuation, be aware that not all are created equal.

RP Data lists four different types of valuation that you’ll want to understand:

  1. Full valuation
  2. Short form or pro forma valuation
  3. Restricted valuation (to include “restricted assessment”, “kerbside” and “drive by” valuations)
  4. Desktop (to include electronic valuer review – EVR)

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Cost of renovating on the way up

Tool belt thumb Cost of renovating on the way up

INSPIRED by The Block?

Want to get a few tradies around to do up the house? You’re not the only one, with home renovations tipped to pick up pace this year.

The only downside is it won’t be cheap.

According to new research by trade services website, Adelaide is now the most expensive capital city to renovate in.

Brisbane is not far behind, while Melbourne only recorded a small increase in the cost of renovations and Sydney remained fairly stable.

The Housing Industry Association’s latest update on the housing and renovation industry tips renovation activity to pick up by 3.6 per cent in the next financial year, taking renovation investment to $29.8 billion nationally.

New South Wales, Queensland, South Australia and Tasmania are all expected to experienced increases.

According to new the analysis by the cost of hiring tradies to carry out renovation work has increased in the most in Adelaide in the past 12 months with costs rising by 18.9 per cent.

At the same time dwelling prices have only gone up 2.5 per cent.

The average hourly rate for a tradie for home building and renovations is now $58.62 in Adelaide compared to the national average of $56.96.

The biggest price increases in Adelaide were for flooring tradies with hourly rates by more than a fifth.

Jeremy Levitt of said it basically come down to supply and demand.

He said in Adelaide and Brisbane there were not as many tradies available as in Sydney and Melbourne so they could afford to charge more.

Mr Levitt said the number of people wanting to renovate appeared to be on the way up.

“There has been a much bigger increase in the number of people seeking general renovation work,’’ he said.

In Brisbane renovation prices took a big jump in the past 12 months going up by 7.5 per cent.

Brisbane home renovators also pay above the national average for tradies at an average rate of $58.48 an hour.

In the past six months the number of renovation jobs posted on their website has gone up 55 per cent.

While property prices continue to rise in Sydney renovation costs have remained fairly stable during the past 12 months increasing less than 0.4 per cent.

Mr Levitt said this suggested it was probably an ideal time for Sydney residents to renovate, costs were stable but property prices were rising.

A number of trades actually dropped prices according to the research, with tiling dropping most significantly by 34.3 per cent.

Tradie costs nudged forward a little in Melbourne by 2.5 per cent in the past 12 months.

Story Source:

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RBA warns on rise and fall in real estate

RBA Govenor thumb RBA warns on rise and fall in real estate

The head of the Reserve Bank has warned Australians to be careful when borrowing and making investments in housing, as boom times don’t last forever.

RBA Governor Glenn Stevens says a rise in house prices, as the market is currently experiencing, is usually followed by a fall.

Speaking to a business lunch in Brisbane, Mr Stevens used the recent experience in south east Queensland’s housing market to warn of fluctuations in real estate.

"Part of the story here is that in an earlier environment of fairly easy access to credit, dwelling prices rose too high relative to incomes in some areas," he said.

"There was also perhaps, in some instances, too much construction of the wrong sort of dwelling.

"Even if a full-blown crisis does not eventuate, as was true of Australia, overdoing it on housing on the way up is usually followed by a fairly extended period of working off the problems."

Mr Stevens said the price of a Brisbane dwelling was historically about 60-65 per cent of those in Sydney, but at its peak a few years ago Brisbane prices were up towards 85 per cent of Sydney levels.

They have now fallen back to the 60-65 per cent of Sydney levels.

"The cycle has taken about a decade," Mr Stevens said.

"That the cycle can be so drawn out is a salient lesson, including for those outside Queensland.

After growing at an annual average pace of 12 per cent between 2002 and the peak in late 2009, house prices in Brisbane fell when credit conditions tightened during the global financial crisis, and remain around five per cent below their peak, he said.

"At present there are welcome signs that the Queensland housing sector is now lifting off the bottom. But this has been a long cycle," Mr Stevens said

Story:   Jason Cadden,  AAP      Source:

tt twitter micro3 RBA warns on rise and fall in real estate

Good homes need great bones

Building your home thumb Good homes need great bones

Building a house? Strap in for an exciting ride and a once in a lifetime opportunity to create something really special.

But if there’s one thing you absolutely should do first – it’s spend the bulk of your time thinking about making the design work for years to come.

That doesn’t necessarily mean getting an architect involved, but it does mean being informed about how people will live and move about inside the home and where you should have sun in the home, how wide your eaves need to be, and how you will capture the breezes.

Many home builders understandably get fixated by how their house will look – from tiles to flooring, to paint and fixtures. But given fashions are fleeting and interior finishes will quickly date (no matter how neutral – or cutting-edge – you try to be) most of the energy should go into ensuring the actual layout is designed the right way.

Tiles and paint can always be updated but it’s much harder to re-orientate the entire house and shift whole rooms around.

It is absolutely flabbergasting to hear people in the throes of building their homes say that they just "chose the house that fitted the block" and didn’t think too much about which areas of the home would receive winter sun. Especially when there’s so much information available as to how to get it right.

Often these are young couples spending $300,000 – $600,000 building a home that they hope to live in for many years. But they are setting themselves up for less than optimal comfort and higher than necessary energy bills.

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Close to the CBD is not all it’s cracked up to be

city 2 thumb Close to the CBD is not all its cracked up to be

Many of those who advise people where to buy do so under false pretences.

They bring to the game a set of cherished attitudes which are unshakeable, unchallengeable and unmitigated nonsense.

What they don’t bring is research-based knowledge, or a clear understanding of the factors that drive capital growth over time.

For some of these pretenders, the list of criteria has just one element: proximity to the CBD.

Why do you think this suburb is a hotspot? Because it’s five minutes from the CBD. Why is this other suburb a no go zone? Because it’s an outer suburb, a long way from the CBD.

That’s pretty much it. You can’t expect capital growth unless you’re walking distance from the tall office buildings.

One real estate service provider recently nominated the City of Armadale as an area to avoid in Perth because it had no capital growth potential. It was too far from the Perth CBD.

In reality, the City of Armadale is the capital growth king of the Perth metropolitan area in the past 12 months, with most suburbs delivering double-digit price growth, headed by Brookdale which grew 16% and Mt Richon which grew 20%.

his is someone who makes his living advising people how to grow their wealth through property investment. Apparently capital growth is not part of the plan.

A Sydney buyer’s agent, asked by a newspaper to nominate the five best places to buy, recommended a bunch of “prime” suburbs. Again, it appears the clients of this un-researched buyer’s agent are interested in elements other than capital gains, because “prime” Sydney has been the worst-performing sector of capital city Australia over the past 10 years, notwithstanding the growth experienced in 2013.

To base your assessment of a location’s worth on proximity to the CBD is not only simplistic but shows a lack of the elements that matter in real estate.

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Reserve Bank says tighter lending standards could stem real estate over-exuberance

Reserve bank no 2 thumb Reserve Bank says tighter lending standards could stem real estate over exuberance

At the end of last week, the Reserve Bank offered a possible glimpse of the future for its housing market policy.

That future may be macroprudential policies and, judging from the comments by the bank’s governor Glenn Stevens, it will not be a New Zealand-style loan to property value cap, but a loan to income limit.

"The most effective tool could be that when banks test people for an interest rate, so you are supposed to be able to make the payments not just at the current rate but, say, 200 [basis] points higher, APRA could insist that the test be made 300 higher, or 400, or whatever, so that people do not get overcommitted," he told the House of Representatives Economics Committee.

Banks already ‘stress test’ borrowers to see if they can afford to make repayments at higher interest rates – late last year Mike Smith said ANZ had lifted its test to 2.5 percentage points [250 basis points] above current mortgage rates, up from a 1.5 percentage point test previously.

The bank has done that in response to record low mortgage rates, with many standard variable discount rates around 5.2 per cent or lower.

At current rates, ANZ’s old buffer of 1.5 per cent would have been a safeguard only against interest rates returning to average levels (about 6.7 per cent since June 2004), and even its 2.5 per cent buffer will not protect it (or its borrowers) against rates returning to the most recent high of nearly 9 per cent, seen only five-and-a-half years ago.

So there is a strong financial stability argument for the Australian Prudential Regulation Authority (APRA) to start making banks put a 3 or 4 percentage point safety buffer on current rates when they test borrowers’ ability to meet repayments.

However, there is another, more immediately pressing, reason why so-called macroprudential policies (such as this larger interest rate buffer) may be introduced.

A Bank for International Settlements report shows that using larger safety buffers when testing borrowers’ ability to repay loans results in a fall in demand for credit, and slower lending growth usually translates to smaller home price gains.

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