AuthorStephen

Looking to buy property? Depending on your lifestyle, an apartment could be just the ticket
– here are some of the financial benefits.

While the traditional dream of owning a property is the big
house with the red door and two and a half kids, times and
attitudes are changing. Many people want to live in the city
where the action is, but getting a house near the CBD can
be difficult.
This is where units can be a great option once you find the
right home loan. If your taste is more for a New York loft
than a family home, then you’ll definitely want to know
about the financial benefits of living in an apartment!

The magic of maintenance

When you own a home, you’ll have to take care of fixers
and leakages yourself. This can be really costly, especially if
you haven’t been scrubbing up on your handiwork or Tim
Allen grunts. But when you buy a unit, you will pay body
corporate fees that will have everything organised for you.

Insurance? Taken care of.

Buying an apartment also means paying strata levies. This
covers a great deal of things, including building insurance.
That means in the unlikely event that your building burns
down or is struck by some other unfortunate act of God,
you will be covered.

Cheap as chips

Compared to buying a home, units are a much cheaper
option. RP Data research showed recently that houses are
19.6 per cent more expensive than units. And with prices
rising across the board, it can be simpler to put money together
for a new apartment.
Of course, there are a lot of benefits to buying a home. But
that’s a story for another blog! If buying an apartment
sounds like it’s up your alley, make sure to check your finances,
call Peninsula Home Loans today and see what kind of home loan
you can get.

Worried you should have already started saving? Here are some signs that it’s time to knuckle
down and get working on that home deposit.

Did you know that 10.2 per cent of Australians between 6
and 13 years old have more than $1000 saved? Now, of
course this is probably with a little bit of help from their parents.
But the Roy Morgan research from last year that revealed
this might come as a wake up call to many of you.
Saving to make a home loan work for you so you can buy
a house can take a while, but taking the plunge and committing
to saving can be difficult.
With this in mind, here are some signs you might already
be able to start putting funds together for a great home.

You can eat your dinner in a fancy restaurant
It’s important to treat yourself to a nice dinner every now
and then. But if you find yourself eating out in nice places
several nights a week, you might be in a place where you
can make some serious savings!
For example, let’s say you cut out one $30 dinner or
brunch per week, and made food from home instead. Alternatively,
you made your own lunch instead of buying it
during the working week. Over the course of a year you
can save well in excess of $1,000 – and think about the
culinary whiz you’ll be by the end of that time too!

You have a local bar
If there’s a bar you always head to on Friday or Saturday
for a couple of drinks with friends, maybe give yourself one
night every few weeks where you opt out, and do something
cheaper or free instead. This can save you a great
deal of money in the same way cutting out some restaurant
trips will.
Try and find a reason not to go out every evening, and
you’ll start seeing benefits to your savings in no time!

Cash rate continues its descent to lowest rate in Australia’s history.

In what was one of the more contentious rate decisions of late, the RBA has
announced that the best course of action was to reduce the cash rate a further
0.25%.
This decision was less about offsetting negative economic trends, but to further
stimulate positive growth signs throughout Australia’s economy.
RBA Governor Glenn Stevens makes special mention of the favourable lending
environment:
“Low interest rates are acting to support borrowing and spending, and credit is
recording moderate growth overall, with stronger lending to businesses of late.
Growth in lending to the housing market has been steady over recent months.
Dwelling prices continue to rise strongly in Sydney, though trends have been
more varied in a number of other cities. ”
What does all this mean? With many predicting this to be the final rate cut of
2015, now is the time to consider whether your current loan is the right one for
you, right now.

Not everyone knows exactly what to do when the Reserve
Bank drops the cash rate and holds it low – but here are
some options available to you.

As you likely heard, the Reserve Bank of Australia dropped
its official cash rate back in February to 2.25 per cent, and
has since decided to hold this rate. This resulted in very
low interest rates on home loans – the lowest since 1968,
according to Tim Lawless from CoreLogic RP Data.

That’s all well and good if you know exactly how the cash
rate and interest works, but obviously we don’t all have a
degree in economics! So what does the low cash rate
environment really mean for you?

More money in your pocket
Planning mortgage repayments can put a strain on the
budget, especially given the increasing property prices
across Australia. But with interest rates following the cash
rate cut and decreasing, there’s actually an opportunity to
claw back some funds when you take out a home loan.

The Commonwealth Bank says that on a $300,000
mortgage, the 0.25 percentage point cut from the RBA
results in $48 of savings per month!
This might not seem like much overall, but remember that a
home loan can last for 30 years – $48 per month becomes
$17,280 at this length of time! Of course, you can do with
this what you want – buying something to treat yourself
could be your way to go, or you might want to pay off your
mortgage that little bit faster. The power is yours!

A healthier market
The reason the Reserve Bank decides to drop the cash
rate is often to spark demand in Australia. It’s a reaction to
consumer sentiments low levels, and is seen as a
stimulant for the wider economy by making mortgages
more affordable and spending on items like credit cards
less dangerous due to reduced interest.
What this can mean for the real estate market is much,
much more activity. In fact, in the March statement about
the cash rate, the RBA Governor Glenn Stevens said that
investor activity was thriving – so clearly the ploy is
working.

As for you and your search for the right home, this offers
the opportunity for some great capital gains when you buy
real estate. Higher demand can drive up prices, and if
you’re someone taking advantage of a low interest rate
environment,

The cash rate has remained on hold at 2.25% however, the RBA speculates that another rate cut is on the way.

Both moderate global economic growth and a below-trend pace of domestic growth are the key reasons for the RBA board deciding to leave the cash rate at 2.25% today.

However, in the official statement released on behalf of RBA Governor Glenn Stevens, it was mentioned that a further rate cut is still a possibility should there be any further decline in the current levels economic activity.

One key area that remains steady is Australia’s housing market. As the RBA announcement states: “Growth in lending to investors in housing assets is stronger than to owner-occupiers, though neither appears to be picking up further at present. Lending to businesses, on the other hand, has been strengthening recently.”

So, what can we expect in the coming months? Despite the ‘wait-and-see’ approach taken by the RBA, many economists are predicting a rate cut before July. This is good news for any borrower out there looking to invest, buy their first home or simply refinance, as this is the ideal time to take advantage of the lowest rates in Australia’s history.

Regards,

Stephen Bonfield

The RBA has left the cash rate on hold for another month, despite speculation it would drop again.

With recent inflation levels remaining low, there was division amongst industry experts as to whether another rate cut was on the table for March. However, the Reserve Bank of Australia Board has elected to keep the cash rate at the record low of 2.25 per cent.

In the official statement from RBA Governor Glenn Stevens, special mention was made of the current lending market:

“Credit is recording moderate growth overall, with stronger growth in lending to investors in housing assets. Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months.”

Finsure Group Managing Director John Kolenda, said it will be no surprise to see the RBA make another rate cut in the coming months and it could even take the cash rate below 2.0 per cent for the first time.

“Central banks around the world, most notably China, have been moving their official interest rates south and the RBA will probably have to follow suit,” he said.

“Mining investment in Australia remains in retreat and other sectors have not picked up the slack so more is likely to be needed to reinvigorate the domestic economy. Further rate cuts may help to get things moving and boost consumer and business confidence, which has not been helped by the uncertain national political climate.”

Mr Kolenda said one concern from the RBA taking interest rates further down after a long period of inaction is whether it overheats the property market, which is already red hot in Sydney.

“Any nationwide lift in property prices is likely to result in a hasty correction from the RBA, which is always wary about housing prices,” he said.

“In the short to medium term interest rates should remain at low levels but borrowers should always be prepared for rates to inevitably rise again.”

If you are thinking of building your own home, you will need to be familiar with the ins and outs of construction loans.

Construction loans are just not as straightforward as simple home loans. There are additional decisions to be made about the structure of the loan, additional documentation is required and the funding is released in an entirely different way.

Documentation

In addition to documentation about your finances, income and identity, your application for a construction loan needs to include contracts or tenders for the construction, as well as the plans so that a valuation can be performed.

Further documentation will also be required before the first payment is made from the lender to the builder, including a schedule of the payments to be made (called drawdowns), the builders’ insurance details and the final plans that have been approved by the local council.

Structure

To avoid having to contribute your full deposit and being charged interest on the entire loan amount from the moment the land purchase settles, you can split your mortgage into a land loan and a construction loan. At settlement of the land purchase, you pay lender’s mortgage insurance (LMI) on the land loan, if LMI applies, and start being charged interest and making repayments on the balance of the land loan. The interest and repayments on the construction portion then kick in only as each drawdown is processed.

Funding

The drawdown schedule is very important, as you don’t start paying interest on each portion of the loan until it is paid to the builder – you, the lender and the builder need to be satisfied with the schedule.

For the lender to make each payment to the builder, you will need to fill out a drawdown request form from your lender, and submit it to your builder. The builder can then send the lender your form with an invoice for that part of the payment and, after the lender is satisfied that the work has been completed and is up to the standard expected in the valuation, the drawdown can be completed with a payment to the builder.

Any changes to the contract and plans can trigger a reassessment of the loan, so be as sure as you can be that the plans and contracts the lender sees are final, and it is also worth trying to pay for any small amendments from your own pocket, rather than changing the loan and risking a reassessment.

Problems can also arise when other work on the site that isn’t completed by the builder needs to be paid for, as some lenders only make the remaining funds of the mortgage available after the completion of construction. While some builders will include subcontractors as part of the main contract, meaning that they can be paid by the builder as stages of work are complete throughout the drawdown schedule, others will not do this. Again, this may make it necessary to pay from your own pocket.

Call Peninsula Home loans today they have the expertise to find you the construction loan that best suits your needs.

Interest rates are a big factor in each repayment and the total cost over the life of a loan, so staying on top of your current rate as well as the interest trends across the market is essential.

By staying on top of interest rates, borrowers can make informed decisions about choosing a first-time home loan or getting a better rate by refinancing.

Interest rate percentages are based on a number of factors: the Reserve Bank, the cost of money on overseas markets and the general state of the economy. Interest rates don’t appear to move by much when looked at as a simple number, sometimes only a fraction of a per cent (referred to as a basis point, which is equal to 0.01%), but each basis point makes a significant difference to the total cost of a loan and makes a big difference when you’re working to pay down your mortgage.

When you first lock in a home loan, you will choose a fixed or variable interest rate. A fixed rate does not change over a set period of time, and your payments will be predictable each pay cycle. On the other hand, a variable rate is attached to the market interest rate and will move up and down with the market.

Interest rate calculators are very useful to help you compare rates across fixed and variable loans, and translate the rates into an impact on monthly repayments, loan length and the total cost of a loan.

The best way to keep on top of those movements is to stay in contact with your credit adviser. He or she will be able to help you shop around to find the best deal for refinancing when the time is right for you.

Call peninsula Home Loans they can help you understand how to secure the best interest rate for your mortgage.

What do light fixtures, flooring, garbage bins and shower curtains have in common? They all age, wear out, and
depreciate in value. They are also items that property investors can claim against their taxable income. For owners
of income-producing property, depreciation is a valuable source of tax deductions – and 8 in 10 property
investors don’t maximise them, research from BMT Tax Depreciation indicates.

Depreciation can be a valuable tool for property investors
seeking to improve cash flow and reduce their taxable income,
according to BMT Tax Depreciation managing director,
Bradley Beer.
“Depreciation allows property investors to make claims to the
Australian Tax Office (ATO) for the wear and tear that happens
to a property and its fixtures over time. As depreciation tax
deductions can add up to thousands of dollars, it pays for
investors to understand the scope of deductions available to
them and the cash flow advantages they can deliver.”
During the first 5 years of ownership, when property investors’
cash flow is typically at its weakest, depreciation can make a
big difference, according to Beer. He explains:
“It’s typically a time when investors’ loan to value ratios (LVRs)
are at their highest, and returns are at their weakest. Property
depreciation can relieve some of the financial burden associated
with the purchase of a property during those early years.”

What items can property investors claim?
 A property’s structural assets e.g. the property’s physical
structure, external garages and patios
 Plant and equipment items within the property – e.g.
toilets, flooring and light fixtures
 Common property in apartment buildings or blocks of
flats – e.g. driveways and pools – any part of a property
that tenants have common use of, and to which access
is included in their tenancy agreements
 Common household items such as smoke alarms, door
closers, shower curtains and garbage bins.

Beer recommends that property investors have a depreciation
schedule prepared by a Quantity Surveyor, who inspects the
property, to ensure all items are accounted for and claims are
maximised.

Read your home loan statement lately? Do you know your
loan’s interest rate? If your home loan paperwork is gathering
dust, make it a New Year’s resolution to get reacquainted in
2015. A simple review of your home loan could uncover serious
savings.

Reviewing your loan can be as easy as asking yourself these 5
simple questions:

1. What’s my home loan interest rate?
How does it compare with what’s being advertised today? There is aggressive
competition among lenders to secure new
customers. Make sure you know what rate you’re currently
on, and how it compares to current rates being
advertised. However, keep in mind that the lowest rate
isn’t necessarily what’s best for your situation.

2. What are my annual fees and charges?
Establishment fees, package fees, annual fees, exit fees – over the life
of a loan they add up! If your situation has changed
since you first took out your mortgage, speak to us to
see whether you may be able to avoid paying some of
the fees.

3. Is my loan type working for me, and for my financial
situation?
If you have a fixed rate loan, your repayments
are predictable, but you may hate it when you
watch rates dropping. Review your fixed rate loan when
you’re nearing the end of the loan term. Got a variable
rate? They fluctuate when lenders move their home
loan rates – which are often independent of the cash
rate cycle.

4. What are my loan features?
Am I making the most of
them? Your loan may come with features you don’t
use. Features such as the ability to make extra repayments
without penalty, or a redraw facility, giving you
access to your extra repayments. Unsure about the
features of your loan, or how they work? We can step
you through them.

5. All too hard?
Who can assist me? If chatting with multiple
lenders and researching an ever-changing market
isn’t your thing, talk to us!