If you are struggling to meet your monthly mortgage payment, you might consider applying for a home loan refinance quote. Refinancing your mortgage for a longer period can considerably lower your monthly mortgage payment. However, there are some risks.

Reduce Your Mortgage Payment Refinancing Risks

If you extend your home loan mortgage’s term, you will probably pay more interest to your lender. If you are just looking for some short term relief then back to paying a larger amount, the increase in interest may not be significant. Lookout for any prepayment penalty before you cast off your old home loan. The cost just may be prohibitive

How do I know if I should refinance Reduce My Mortgage Payment?

Usually, it’s a good idea to apply for a home loan refinance quote if official interest rates have dropped significantly since you took out your current mortgage. The recent .5% drop may not be enough to make it worthwhile unless you are desperate. If you cannot meet your current payment then a refinance is your first port of call. You probably do not want to leave it until your lender is about to foreclose. To maximize the benefits of a home loan refinance, it is advisable to think long term. Even if you plan to pay off your loan quickly after you get back on your feet, it takes a while to make up the cost of the refinance.

How do I apply for a home loan refinance quote?

I am a big fan of using the internet for all my business. As such I suggest you apply for a free home loan refinance quote online if you are planning to Refinance to Reduce Your Mortgage Payment.

They way the world economy seems to be heading is a worry for all of us, however, we can only take care of our own patch. Please make sure you are are on top of your personal finances, so that you can minimise the effect of the global problems.

The cut in interest rate’s, is a welcome respite for home loan borrowers. But should we just bask in its glow or should we be thinking longer term. After all home loans are generally for 30 years. Maybe we should take full advantage of this current rate cycle to pay more off our home loan mortgage, and save on future interest and maybe pay the loan out earlier.

Take Advantage of The Home Loan Interest Rate Cut

A simple, tried and tested strategy, is to keep your loan repayments at their current level. With a standard variable home loan you will pay more off your principal, maybe giving you a buffer against future rate hikes.  While I like this idea, of paying out a loan early I also like the functionality of a 100% mortgage offset account. The benefits of a 100% mortgage offset account are discussed here.

Home Loan Interest Rate Cut, A Reason To Speak To Your Lender.

Your relationship with your home loan mortgage lender is a very important financial link .  The home loan interest rate cut gives you a very valid reason to make contact and discuss your options, with an eye on improving your situation. If they do not want to provide service, call your broker or contact a new broker. You deserve good service and deserve to be able to ask the big questions to enable you to move forward and improve your financial security.

Data from one of Australia’s leading rental property research houses, suggest the rent or buy question has become more a case of how much you earn. According to RP Data, housing costs for renters are on average 2% higher than their mortgage holding counterparts. RP Data draw a conclusion that although renters have greater flexibility as far as their location, they are paying for the privilege and often paying in excess of 50% of their income on rent and on costs. They go on to say that there research indicates that mortgagees typically earn more than renters.

How To Get A Home Loan

So if you are renting and have decided to buy into the great Australian dream, the message seems to be, get a better higher paying job or start making more money! This message may seem harsh, but unfortunately with all the tightening of lending regulations and high property prices, owning your own home has become a goal that is hard to achieve. To get a home loan it now seems you will need to have at least $50,000 in personal savings, a clear credit record and have been in your job for two years. The home loan lenders continue to offer 95% mortgages, but the lenders mortgage insurance on these deals can add as much as 5% of the total loan. 5% of a $400,000 loan is $20,000. It appears the mining boom and the GFC combination have conspired to make home ownership very difficult in Australia.

The Good News

Property prices are under pressure and forced and mortgagee sales are up. This means we may see a correction in values. My suggestion, if you can get finance and want to become a home owner, is that you make contact with all the real estate agents in a area you like and let them know you are in the market for any property that may come on the market. Let them know you want them to contact you and you want first dibs on anything that comes on the market before the signs go up. This approach may jag you a bargain, as lenders and borrowers in trouble will be trying to keep the cost of marketing their property low. Meaning they can save a heap on advertising if a buyer can be found quickly. If you get a deal, you can open up a bottle of quality Australian shiraz wine and celebrate your good fortune and toast my advice.

Ever been confused by a home loan consultant? I have and have once ended up with a loan I did not care for. Under new rules for lenders imposed by the Australian Government this will not happen again.

The Australian Government requires all lenders offering home loans to give you a  home loan key fact sheet when you ask for one, and to make it available on their company website.

Where To Get Home Loan Key Fact Sheets

From 1 January 2012 all home loan mortgage lenders must provide a home loan key fact sheet when you ask for one. If your mortgage broker or bank lender cannot provide one in a reasonable amount of time, I suggest you move on and find a new lending professional. You may not always be able to get the “Key Fact Sheet” at your first appointment, but remember to ask for it, so you can make proper comparison before you commit.

How To Use Key Home Loan Fact Sheets

A home loan fact sheet is supposed to be a comparison tool with exact information about the key points of each lenders offering, delivered in a standard format. Including interest rate. If you like a particular home loan offering, you should use the fact sheet as your reference when you make your loan application to make sure you are getting what you asked for.

Legitimate Home loan Key Fact Sheets have the words This Key Fact Sheet is an Australian Government requirement under the National Consumer Credit Protection Act 2009 on the top right hand corner.

A key fact sheet is not an offer of credit from a lender, you will still need to apply for a loan and hopefully meet the lending criteria imposed by the lender.

If you are house hunting and loan hunting in the new year ask for your home loan Key Fact Sheet from your lenders.

Before you put yourself through the pain of a home loan refinance, ask yourself these particular questions.

Am I currently feeling any mortgage stress. i.e. is your mortgage payment more than 33% of your after tax income?

Are my other debts, credit card, car loan, store accounts killing my social life and making it hard for me to meet my mortgage repayment?

Is my loan rate over 2% higher than those being currently offered and sold by lenders?

If you can honestly answer at least two of these questions in the affirmative, then it may well be worth calling a mortgage broker.

However, please read an old post of mine that points out some pitfalls of refinancing your home loan.

So Should I Refinance My Home Loan

Our home loan is one of the few financial products that we can have a say in.  While there is good competition between the traditional big banks and credit unions we continue to have the chance of a better deal  and the possibility to save thousands with either a better rate or lower fees. On the other hand, it can be a painful experience dealing with the inevitable bureaucratic stone walling of the various home loan providers credit department and can in some cases lead to problems.

Sold Rental Property

Tax On Sale of Rental Property

The sale of a rental property for more than you originally paid for it will generally mean you will have to pay some capital gains tax. However the amount you pay will be determined by your income tax bracket, other capital gains or losses you may have, your cost base and some other factors that may be specific to the location, type and Government rulings.

Sale of rental property that was once my home.

In the circumstance where the rental property was once your main residence you may be eligible for a capital gains tax exemption on part or the whole of the profit you make. My advice here is to contact the Tax Office or your private tax professional. In this case having complete records of the purchase and sale of rental property details of your property are paramount. You should also have records of dates when you first rented out your property and a valuation at that time if you had one done.

Capital Gains on Sale Of Rental Property

For your particular situation, I suggest you talk to a professional tax advisor or the Tax Office. However in general, the sale of your investment property will trigger a capital gains event. When this happens you will need to include a capital gains calculation in your end of financial year tax.
You will need to:

1. Determine the amount of your proceeds from the sale.
2. Determine your cost base. (Your capital gains tax cost base consists of the following: the original purchase price, any costs associated with purchasing it, any costs associated with selling it, e.g. agents’ commissions & legal fees less any depreciation you have claimed on the asset.)

Work Out Capital Gains On Sale of Rental Property

Contact Taxsolvers for a definitive answer on wether or not the sale of your rental property is subject to capital gains tax.
If you have determined your sale is subject to the capital gains tax provisions, you need to work out if you made a gain or a loss.
If your sale proceeds are more than your original purchase cost, plus selling costs and unclaimed expenses, you will generally be subject to capital gains provisions. The net capital gain is added to your taxable income and taxed at your marginal rate. For more on this, see calculating capital gains. A capital loss will not deductible against your ordinary taxable income, but can be used to reduce any other capital gains you make in the year, or any gains in subsequent years. You can carry forward capital losses in your tax indefinitely, but they must be applied to gains when they occur. You will not be able to pick or choose the timing of the application.

Offsetting capital gains tax on the Sale of Rental Property

Your best bet here is to sell all the dud shares or assets that sitting as losses in your investment portfolio in the financial year you intend to sell your rental property. These losses can be used to offset the gain immediatly. Check out this rental property capital gains calculator for an idea on your personal situation.

Check your mortgage statements for errors before you cut your ties with any lender. The super mortgage calculator will find any errors and help you get a refund from your lender.

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Have you heard of the term Mortgage Arrears? Generally it means that a home owner is not up to date with their mortgage and in breach of their repayment agreement with their lender. This is potentially a very serious situation and can lead to the home owner and their family being subject to mortgage arrears repossession and put out on the street by their lender or mortgage holder.

Mortgage Arrears Causes

No-one usually forgets to make their mortgage repayment, if your mortgage is in arrears it will usually be on account of a family emergency, medical bills, business down turn, job loss or a rude increase in interest rates. The increase in interest rates, food, petrol, electricity and gas prices has hit families particularly hard and making mortgage arrears a problem for many.

Mortgage Arrears Resolution Process

Your options to resolve your mortgage arrears all revolve around speaking to your lender as early as possible, so that a solution can be worked out before things get out of hand. Your lender will not be happy about you slipping into arrears, but they will give you credit for being upfront and make an effort to keep you a happy customer, while protecting themselves and their shareholders. They may suggest many things from a double payment in the future, extending your loan period, debt consolidation, extra payments for a period to get you back in line or a new loan. Whatever they suggest it will be time sensitive, so you will need to be prepared to act immediately. Have your taxes up to date, keep your pay slips, have a list of your current monthly expenses such as telephone, electricity, gas, rates ready and be honest with yourself about how much you spend on food and entertainment. It may even be worthwhile visiting a financial budgeting firm like My Budget for some advocacy. If your arrears is over two months, there is still hope, but dialogue must be started with your lender. Stop ignoring their letters and seek mediation or consultation.

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The Reserve Bank has resisted increasing the RBA Cash Rate for the seventh straight month. The official overnight cash rate target remains at 4.75 per cent.

Thankfully they have heeded recent economic data that shows our economy is far from healthy. A strong Australian dollar is battering our exporters. A rate rise to curb inflation would have just been a dumb idea.

What is Your Take On The RBA Cash Rate?

Please leave a comment about this news. I am flabbergasted that the RBA was even considering a rate rise, given Australia’s current sluggish economy.

From the ABC:

Australia’s economy has suffered its biggest quarterly contraction since the recession of the early 1990s.

The Bureau of Statistics national gross domestic product (GDP) figure fell a steep 1.2 per cent in the March quarter, largely as a result of the flood impact on Queensland coal exports.

The fall is larger than the 0.9 per cent contraction at the height of the financial crisis in late 2008, and is the worst result since the March quarter of 1991, when the economy shrank 1.3 per cent.

Forecasts for the March quarter ranged between a fall of 0.2 per cent and a slump of 2 per cent in a survey of 25 financial institution economists by Bloomberg.

The median forecast centred on a steep fall in GDP of 1.1 per cent, putting it close to the actual result.

Analysts had substantially lowered their forecasts after yesterday’s quarterly trade figures came in much worse than previously expected, and wiped 2.4 percentage points off Australia’s economic growth.

Before yesterday’s figures, most economists had been expecting a GDP fall in the range of just 0.3 per cent, although Treasury had warned that a fall of 1 per cent or more was possible.

‘One-off fall’

The ABS says flooding over summer had a significant impact on the result, due to a fall in the volume of minerals mined.

That is reflected in a 6.1 per cent fall in the mining sector, which was the biggest industry detractor from the economy in the March quarter, taking 0.6 percentage points off economic growth.

Manufacturing fell 2.4 per cent and Agriculture was down 8.9 per cent, both of which detracted 0.2 percentage points from GDP.

One bright spot in the figures was a rise in private capital formation, an area that covers investments by companies to increase future levels of production.

RBC Capital Markets strategist Michael Turner says the detail of the data indicates it should be a one-off fall in GDP.

“Consumption was the big surprise, business investment also looks pretty strong as well,” he told Reuters.

“The main takeaway is that consumption is still ticking along pretty well – I know retail is soft, but there are other parts of consumption that are doing pretty well.

“It will certainly encourage them [the RBA] that they have not tightened too much.”

Commsec’s chief economist Craig James says it is unlikely that the economy will contract again in the current June quarter, meaning Australia should avoid a technical recession.

However, he says the economy is still showing many signs of weakness.

“As always, we shouldn’t put too much emphasis on one quarter’s figures, especially as the March quarter result was so significantly weather affected,” he wrote in his initial analysis of the data.

“But it’s worth noting that the economy recorded no growth back in the September quarter before lifting 0.8 per cent in the December quarter and then going backwards by 1.2 per cent in the latest quarter.”

The Australian dollar jumped around half-a-cent on the data, from 106.72 to 107.18 US cents, as some of the worst analyst predictions of falls between 1.5 to 2 per cent did not come to pass.

The Australian economy grew at a modest 1 per cent in the year to March.

State by state

The figures for state final demand, which exclude the contribution of exports or imports, are the best ABS estimates available for economic growth across the different states and territories.

However, the exclusion of exports and imports obviously changes the figures dramatically from the national numbers, where trade figures wiped 2.4 percentage points off growth.

Data limitations aside, the figures provide a glimpse into the relative health of different state and territory economies.

Western Australia and the ACT had the strongest growth in state final demand of 3.2 and 3.3 per cent respectively in the March quarter, seasonally adjusted.

However, the ACT’s figures are prone to more volatility and revision because of the smaller size of its economy.

Tasmania grew 1.7 per cent, Victoria 1.6 per cent, and New South Wales state final demand expanded 0.4 per cent.

The figures show state final demand in Queensland contracted by 0.6 per cent in the March quarter, while South Australia’s economy fell 0.8 per cent, and the Northern Territory’s economy shrank 0.7 per cent.

Mortgage insurance may be either public or private. A Private mortgage insurance (PMI) is a typical kind of insurance where the lender is compensated if the borrower fails to repay the monthly payments and defaults on the loan. Basically, you require a private mortgage insurance if the down payment is below 20% of the total loan amount. Now, if the borrower fails to pay back, the bank repossesses the house. The insurance company here pays the bank the difference between the amount you put down.

Defaults Without Private Mortgage Insurance

The minimum down payment of 20% is there for the buyer to respect the loan commitment. If the buyer defaults, then there will be a huge loss for the lender. With at least 20% investment in the loan from the buyer, a lender would be able to get back at least the sum by selling the house after a foreclosure.

Down Payments

Since 1950s, Private mortgage insurance (PMI) is available for buyers and lenders. PMI is necessary for the lenders if the buyer makes a down payment less than the traditional one, the 20%. Further, the PMI is there for the conventional loans that are not guaranteed by the Department of Housing and Urban Development, the Federal Housing Administration or the Veterans Administration. The loans that these organizations guarantee don’t require any PMI. Instead they levy their own insurance payments on borrowers.

Private Mortgage Insurance Payments

Today many borrowers pay the PMI premium as a portion of the monthly mortgage payment. Usually, the PMI rate is taken as a percentage. The monthly payments stand around 1 to 2 percent of the total outstanding principal on the loan.

Loan to value

Basically, the bigger the loan value ratio, the more costly the PMI premium is. For instance, in a loan where the borrower makes a 10-percent down payment, the loan-to-value ratio stands 90%. Here the PMI may be around .75 percent of the mortgage amount. As well as, loan with an 85 % loan –to-value may have a PMI around .50 percent.

Cancellation

According to the Homeowner’s Protection Act of 1998, the borrower can request and have a cancellation of PMI if the loan principal amount touches 80% of the selling price. If you make the monthly principal and interest rates on schedule, the lender must notify you the closing of the loan when the 80% ratio reaches.

Guest post the “Average Cost of a Private Mortgage Insurance” by Patricia

There is a lot of confusion among rental property owners about their investment property tax deductions. I will try and clear up some of the confusion in this short and sweet blog post.

Accountants and Investment Property Tax Deductions

Most accountants are happy to help you with the compliance issues surrounding your rental property. They will probably give you a list of things you can or can’t or should not claim against you rental income. For this service they will usually charge you a handsome fee and then tell you off for not keeping good records and send you on your way. But according to the tax office, most rental property owners ignore their accountant’s advice by not keeping good records and supplying ambiguous information. If this is you, you are setting yourself up for a financial catastrophe of monumental proportions.

What to do

Keep good records and understand your obligations. That’s it, nothing else, you bought a property, you rent it, so you are in the business of renting out property. Business’s have to keep good records to survive and comply with the tax collector, period.

Common Investment Property Tax Deductions

• Advertising for Tenants
• Body Corporate Fees
• Borrowing Expenses
• Capital Works and Structural Improvements
• Cleaning
• Commissions & Management Fees
• Depreciation of Plant & Fittings
• Electricity/Gas
• Gardening & Yard Work
• Insurance
• Interest
• Land Tax
• Lease Expense
• Legal Expenses
• Management Fees paid to agent
• Stationery
• Pest Control
• Rates
• Repairs
• Repairs at the end of the tenancy
• Telephone Expenses
• Travel

These are the common deductions, but keep all expenditure receipts as you accountant will know what is deductible and how it is deductible. For more information the Australian Tax Office has some very good publications that detail everything about tax deductions and compliance issues for rental property owners. It is easyier to work within the rules, so your wealth accumulating activities are not derailed by a very big and sometimes angry public authority like the tax office. It is bad enough that you have to put up with interest rate fluctuations.