Australian Mortgage and Loan Information

Useful resources for preparing to take out a home loan or purchase a property are listed below.

Educating yourself in the different aspects of purchasing a property is the only way to guarantee that you get the best possible deal. Nearly all the other players involved in your property related transaction have their own interests at heart and you are fooling yourself if you think otherwise.

With the large amount of money involved it is a case of “Buyer Beware”. No amount of government or industry regulation is going to protect you from making errors or mistakes.

Use the following resources to increase your knowledge and help you in making decisions. Buy a couple of good books from our recommended list – they contain a wealth of information that would take a lifetime to accumulate, and the cost is insignificant compared to the money lost if you get things wrong. Find out what LVR is? It is an important term.

The resources listed below are all resources that I have used myself and have personal experience with, including the books which I own, have read, and regularly refer to as I buy and sell property. Internalising this mortgage, home loan and property information will also help you decide which professionals you make part of your property wealth creating team.

Home Loan Resources
Home Loan Rates
Information on current home loan interest rates in Australia.
Borrowers Check List
What you need to have ready before you approach a lender or mortgage broker.
Credit Comparison Rates
All loans are not equal so how do you compare loans?
Mortgage Calculators
Check out different mortgage repayment scenarios. See also the PC based software and loan calculators below.
Property Related Web-sites
Australian web-sites with useful resources.
Loan/Mortgage Brokers
Helpful Brokers who will find the best loan for your personal circumstances.
Recommended Books
A book list and reviews of Property related books by Australian Authors.
Mortgage Calculator – PC based software
The banks do not want you to use this software because of the refunds they have had to make to users. If you have an existing mortgage then it will pay you to buy this particular mortgage calculator instead of using the free bank calculators. Not only can you do “what if” scenario’s but you can check whether the bank has been ripping you off with your mortgage.

Loan Calculators | Australia

Some tempory mortgage stress relief.

Tenants not paying on time or behind, unable to make your interest payment on your rental property loan?

Don’t use your own money, consider setting up an interest only line of credit allowing capitalisation of interest and use it to pay the interest on your principal investment property loan until you have sorted things out with your tenant or cash flow has improved. If you borrow to pay your interest, the interest on the line of credit will be tax deducible as well. The one proviso is that you genuinely have cash flow problems and are unable to pay the interest on your investment property home loan.

See your mortgage broker for details about interest only interest capitalised line of credit home loans. Remember treat your property investment as a business, not a hobby. Give it a chance to succeed, a ten year chance at least.

The headline should have read: Don’t get your hopes up for a home loan interest rate cut next month.

The murmur from the reserve bank is rates on hold for October because of the aussie dollars slide against the greenback. A lower exchange rate for the Aussie dollar against the US dollar means our products will once again be more attractively priced in the great consumer nations of the world, triggering an organic recovery of sorts. So maybe no need for an official rate cut by the Reserve Bank of Australia to stimulate growth.

Competition between the major banks and other lenders is the only hope for a Home Loan interest rate cut next month. However, the major banks are enjoying their old feeling of dominance as home loan mortgage borrowers seek the perceived safety of a major brand for their lending needs. Remember, most have not passed on last months cut. So the mortgage stress will continue.

Keep an eye on the fixed rate home loan mortgage rates. If they start to go up, look out for a rate rise.

Whatever happens with home loan mortgage interest rates, you can be sure mistakes will be made on mortgage statements. I am sad to admit, but I have let such a mistake slip under my radar. Well not entirely. I bought the Mortgage Watchdog home loan statement checker PC based software back in 2004. I use it regularly on all my investment and non investment home loans. The mortgage checking software sits on my laptop ready to serve me. And serve me it has, by discovering interest overcharges on a line of credit interest only home mortgage I operate as my base account. I have not had a mistake for some time now and I have to admit I got a little complacent. I had not used it for a few months as rates have been steady and I have been busy.

Well, I am glad I have the mortgage checker. You see, my lender has been nice enough to drop my interest rate inline with the official interest rate drop. They told me in a nice note on my statement. However, after using my mortgage statement checking software today to check my latest statement, I find they have continued to charge the old rate. I have an appointment with my mortgage broker tomorrow to sort it out. Please check your all your loan statements, even the credit card and store accounts. Lenders are quick to charge you if you make a mistake with a payment, don’t let them have it all their way. Be vigilant with your credit and home loan statements.

Please find below the results of a quick Interest Only Home Loan survey for Investment purpose.

Major Australian Lenders.
Investment property home loans.
Interest only, one year fixed interest rate.

No comparison rates are supplied as the rate is for investment purpose only. Borrowing costs and other fees may be tax deductible over one or several years.

Lender, rate, max LVR with mortgage insurance, application fee, monthly service fee.

ANZ 8.34% 97% $600 $10

CBA 8.69% 95% $600 $8

NAB 8.69% 100% $600 $8

St George 8.54% 95% $600 $10

WESTPAC 8.69% 100% $750 $8

This is just a snapshot to give you an idea of what’s currently available, the terms and conditions of each loan are available from your mortgage broker or direct from the lender. Products may vary from lender to lender, but are for one year fixed, interest only, investment home loans advertised by the lender as at 21/09/2008. I think Interest Only Home Loan one year fixed rates compare favourably with the standard variable home loan rates of the major lenders and give the borrower some flexibility in times of mortgage stress.

Remember, your home loan funding is an important part of your plan to create wealth through property investment. Interest only home loans can give you the edge.

When I was planning to become a property investor back in the 80’s a wise old man gave me a simple piece of advice. Treat your property investment as a business. If it is a business then the home loan used to finance the business must also be good for business.

To this end my mortgage broker and I agree interest only mortgage loans are the number one type of loan for a property investment in Australia. So why are they number one?

Interest only home loan mortgage.
As the title indicates, an interest only mortgage or home loan means your repayments only have to cover the interest portion of the loan. You do not have to reduce your original home loan principle. After all it is only the interest you pay that is tax deductible, paying off principal just reduces your cash flow. Cash flow is king, as you need it to succeed in any and every business.

Freeing up the principal component for use for other investments is good business acumen. Inflation, demand and supply will take care of the value of your property against the amount of your loan. By lowering the ongoing servicing costs you will keep one step ahead of the principal and interest pack. Most major banks and other major home loan mortgage lenders will allow you to choose an interest only period of up to 10 years, if you can get a longer period of interest only on your investment home loan or mortgage, take it.

Some lenders even let you pay interest only in advance. This will give you significant tax savings in the early years if you have the means.

Interest only home loan mortgage statements are also easier to check for errors. I suggest you still consider some pc based mortgage checking software. Mortgage lenders and banks make mistakes. Recent surveys reveal over 50% of loan statements have errors. Please check your statements.

Non-resident property purchase? Why not Australia?

If you are residing out side Australia and love property like I do, but are wary about a new purchase due to the credit crisis, I have some good news for you. There is a strong rental market in Australia that could provide steady returns for you as an overseas investor.

Australia has a strong economy, is politically stable and safe with strict consumer protection laws. A Residential Tenancy Act of Parliament offers protection for both tenant and landlord, so you get plenty of quality people renting. There are also considerable tax incentives in Australia for landlords. There is also a Privacy Act in Australia that protects consumers. This Act stops unwanted marketing or soliciting. The Australian Competition and Consumer Commission and the Office of Fair Trading are the legal watchdogs appointed by the Government to make investment safe and reduce risk.

Experts agree that as an increase in rental demand pushes rents upwards, Sydney, Melbourne and Brisbane/Gold Coast will have the best rental return potential and capital growth over the next few years. They are also great places to live.

There is one small prerequisite for non-residents investing in Australian property: All non-residents who would like to invest in Australian property have to apply for Foreign Investment Review Board approval. If you have been granted Permanent Residence or citizenship in Australia you will be exempt from this prerequisite. One rule you need to be aware of is that as a non-resident you can only buy new properties and not second-hand properties. A second-hand property is one that has been registered in someone else’s name other than a developer before the non resident purchases it. I suggest you contact the Foreign Investment Review Board for an exact explanation of this rule. The laws of Australia are based on British law which means that the laws behind real estate title are similar.

Experienced property investors can capitalise on the tax incentives in Australia and clean up for years to come. Our home loan interest rates are a little higher than the US, but have generally been fairly stable over the last fifty years and our reputable mortgage brokers and most of the lenders love overseas borrowers.

So consider Australia for your next property investment, better still emigrate here, we would love to see you.

Australian Property, Boom or Bust on US crisis?

Could Australian property prices collapse and go bust as part of a domino effect from the US Sub Prime crisis and credit default swap dilemma?

Last week many popular media outlets reported that the US credit markets may be headed for the drain. Maybe it could happen, and maybe Australian property owners and mortgage holders would be hit with more mortgage stress. Well that was until the US government stepped in with a so called “conservatorship” of the two giant us domestic mortgage providers Fannie Mae and Freddie Mac in a bid to avert what many doomsayer’s prophecy as a global financial system meltdown. The US government as I understand it have taken over the running and financial backing of these two companies.

What a great move. In the past all I have ever seen is governments selling off public assets in a time of crisis. Literally, throwing billions of potential income to the private sector. Buying private assets when they are cheap? This surely is a move in the right direction. This purchase may give the government of the US the largest public ownership of housing outside the China and Russia. You see in the US, mortgage holders are not as personally liable for the mortgage debt as they are in Australia, they can simply just hand back the keys to the house and walk away, leaving the bank to worry about the mortgage and the house. People are dying to get to the USA to improve their lives, and they will want the American dream. Watch out China, this could be the catalyst for the USA economy and its people to resurrect the great boom nation and move it to a new higher plain of economic strength.

If sanity prevails and greed is good as the fictitious Gordon Gecko from the movie Wall Street extols, the worlds debt security markets should be back on track in no time. The US government and therefore tax payers may even make some profit from the recovery. Please be assured, someone will profit big.

Historical Australian Mortgage Interest Rates may indicate more than you think? Cast your mind back to when our Australian Mortgage Interest Rates were 18%. I am sure some people got rich in property, by making a few sacrifices? Recent financial media speculation centres around our Australian Mortgage Interest Rates moving down. I hope they are right. With the downward move I expect an improvement in the liquidity of Australian Property, but maybe not a price increase. The US credit situation will continue to dampen enthusiasm.

My advice? Start scouting for your next property. Some folks will get scared with all this media doom and gloom and sell up, in that case you could find some bargains in the Australian Property market very soon. Make an appointment with your mortgage broker or mortgage home loan coach and be prepared to move quickly before everybody gets on the property boom band wagon again.

A Property Investors, Home Loan Mortgage holders guide.

What is a mortgage interest rate comparison rate and why do we need it?

If you are a Property Investor, that is you own a rental property the mortgage interest rate comparison rate means little. It will only matter as far as the consumer credit code is concerned if you have a loan on your principle place of residence that is not used for investment or business purposes. However, It may be helpful to property investors to cost a mortgage refinance or prospective property investment.

A comparison rate is an Australian Interest Rate figure designed to help home loan mortgage borrowers identify the true cost of a home loan, mortgage, personal loan, consumer loan, any credit with a fixed term. The figure will include both the interest rate and fees and charges relating to a loan, combined to give a single percentage figure. A good example is: a major bank’s advertised standard variable interest rate may be 9.49% and its comparison rate 10.75%.

The ongoing fees and charges added to the actual rate give the comparison rate. It allows the prospective home loan mortgage borrower the opportunity to compare mortgages and other non home loans on an apples with apples basis. It helps you weed out the loans with high fees, or lets you know what the real cost of all the bells and whistles of a home loan or non home loan.

A comparison rate standard formula is used to calculated the figure for each home loan mortgage. The formula takes into account:
• the amount of the home loan or mortgage
• the term or time of the home loan or mortgage
• the repayment frequency
• the interest rate charged at the time
• the fees and charges connected with the loan

A home loan comparison rate will be useful to you in ascertaining almost the true cost of a loan. However it is only a guide as many lending institutions have very complex loan agreements and the actual fees are very hard to understand. They get out of having to include items in the comparison rate because: The comparison rate does not include government fees and charges or fees and charges only levied in certain circumstances. The comparison rate figure will not take into account some features of a home loan which may make a loan more attractive to you, such as fee free banking, weekly repayments or free redraw. If you are a current mortgage holder I suggest you look at the benefits provided by a mortgage statement checker. There are a few mortgage checkers available, choose one and use it to make sure you are not being ripped off by your bank or lender.

Your mortgage broker will have a comparison rate schedule available for you to use. However careful consideration of the features of any loan you may be considering may be more important to you. Having your mortgage broker as part of your Wealth Through Property Investment Team will negate the need to research loans to the Nth degree.

By now you will have realised that I am extremely bullish regarding the Australian residential housing market.

I believe Australian residential property is the very best place to invest your money for consistent long term growth. I am also a great believer in keeping a cash reserve or having a line of credit home loan with unused limit available to cover periods unforseen financial or mortgage stress. I also believe every property investor should have a valid will, various power of attorney’s, as much life insurance as your budget will bear and a mortgage checker program. I don’t think I need to spell out why you should consider these products, you are smart, you are considering a residential property investment!

All the risk management products mentioned above are available online, so there is no excuse if you have made the decision to be wealthy, start today, effectively managing your risks is a priority.

Historical evidence backs up my belief in residential property, and the longer you can keep a property in our capitalist society the wealthier you will become. However, there are a couple of myths about residential property I would like to clear up.

Myth 1. “Australian Residential House Prices Will Never Fall”

I would like to continue to proliferate that myth, but the facts don’t allow me too. The sad fact is House price’s have fallen in the past and a fluctuation in pricing is just a fact a of life that mortgage holders and property investors, rental property owners have to learn to live with while they make a fortune. When demand is high, prices will rise. If demand is low some prices will continue to rise (Location, location), but on the whole prices will tend to slide, but you will still have the rent. Factors that effect demand like interest rates, job’s, business sentiment, government interfering and population will always be present. The underlying factor that drives my confidence in Australian Residential Property is the simple fact that usable land is a finite resource, especially in our capital cities.

Myth 2. “Any Home Loan Mortgage Will Do”

“Just get me the lowest interest rate. I have found the place I want.” My Mortgage Broker bemoans this statement every time we talk about property investment finance. He generally agrees with the notion that his client has the ability to choose a suitable investment property, but he takes exception with the direction to find the lowest mortgage interest rate. The lowest interest rate home loan does not always match with the clients needs and the ideal mortgage loan for the clients circumstance may need to include features that demand a higher interest rate. So there is always a trade-off between cheap and right or quality. Right and quality should always win, because the property investor should be in it for the long haul, and the quality will last. The cheap will probably need to be replaced. (This is why I like my guy, he tells the truth, except for a recent mortgage for a purchase, my loans are all over five years old. Some mortgage brokers would rather churn your loans every three years and make a fat commission every time.)

So I say anytime is a good time to acquire a residential home or investment property. After all you have made the decision to wealthy haven’t you? Plan to keep it for a generation if you can. Cover yourself with the various insurance’s and estate protection legal device’s. Find a trustworthy mortgage broker mortgage coach, a competent lawyer, conveyancer, accountant, builder, real estate agent, insurance broker, planner, quantity surveyor, mortgage statement checking software and friendly property investment mentor. Get it happening, now!