Australian Mortgage and Loan Information

Rate Hiked Again.

Australian Home Loan Interest Rates Hiked 25 Basis Points

The RBA board has decided in its wisdom to raise official interest rates again. The third time in three months. The reasons are not plain to ordinary small business people or home mortgage holders and in my opinion, way to optimistic. The financial crisis is far from over at street level. Lending is tight and many properties very much overvalued.

The latest rate increase means a person who has a 30 year $300,000 mortgage is now going to pay $150 more per month than they would have before this latest hat-trick of interest rate hikes.

So how can you keep your sanity and reduce the effect of these rude, unnecessary and Christmas Grinch like increases?

Increase Your Loan Term:
Contact your broker or lender and see if you can stretch your payments over a longer period. This will lower your current monthly payments and assist your cash flow. The drawback is unless you can eventually pay more monthly, you will pay more interest to your lender over time.

Switch To A No Frills Loan:
Consider switching your home loan mortgage to a no frills operator like MyRate. You don’t really need a branch network to help manage you home loan, you have the Internet. The rate will be lower the only hassle may be getting your current lender to co-operate quickly.

Consolidate Your Personal Borrowing:
It may be a good time to assess the need for those credit cards. Fold your debt into your home loan and cut up the cards. You may not feel as affluent, but you may just enjoy your life a little more without the financial pressure. If your current lender wont help, get a reputable broker to help you.

Fix Your Rate:
You may think the horse has bolted here, but maybe fixing half your loan will at least give you some certainty moving forward, without getting caught out if rates fall, if the financial crisis/credit squeeze worsens.

Earn So Extra Cash:
Start a home based business in your spare time and use the profits to pay off your mortgage.
A Kiwi named Mark Ling has a few ideas. I am currently trying to copy his methods. An extra $500 per month will come in very handy to thwart the RBA and the Lizard conspiracy.

Or you could sit back, do nothing and see if the predictions about 2012 are correct. If they are the mortgage will not be such a worry.

I received the following email from my mortgage broker today. Because of my diverse income streams I used lo doc for one of my loans. He is touting for business I am sure, but the letter also drives home the fact that we have a very different lending environment going forward into 2010.

Here’s the letter:

“I am sending you this email to advise you of some SIGNIFICANT changes that have occurred in the Low Doc market over the last few months.

4/ If you want to buy another Investment property”

I personally think we are returning to the nasty old days like in the 70’s, this means less people able to get loans and a stagnant property sector. I hope I am wrong. Take a look at interest rates in the 70’s, they are high, but not that bad. People just could not get a loan and banks were stupidly tough with lending. However the bankers of that day did not enjoy the extreme bonuses of their counterparts today, so I am guessing the rouges of Martin Place and Collins Street will find a way to gain from others misery.

Now, may just be the time to fix some of your loans for a year or two.

Yes, It is time for a comprehensive analysis of your current home loan?

It seems all the major lenders are tinkering with their home loan offerings. They are playing their cards pretty close to their chest, but you can be assured of one thing, old loan holders will be treated like lepers’ were in the olden days once the new offering is about.

You will be getting plenty of encouragement from the tellers at the bank to speak to their home loan professional.

The “new stuff” will no doubt be irresistible, but will include new clause’s enabling the lender to boot you out of your home if you don’t comply with their current whim or fancy.

Please be prepared. Use a mortgage broker if you can. Heck, use two and play them off against each other.

Rates are on the way up, be ready.

Having a home loan with the lowest interest rate is preferrable, it means we will pay less back to our lender. But is it always the best fit for our particular circumstance?

I have just come back from my meeting with my mortgage broker. We have had a frank discussion about my circumstance’s and the way I feel about my current “Line Of Credit” lender. The upshot is, it is time to move on.

My broker originally suggested no less than twelve suitable products and lenders. Going though the details, features and benefits of each product took us about 15 minutes. We have narrowed it down to 3.

The table below sets out the details of each as at 11/11/2008. I use my Line of Credit for Investment, so no comparison rates are quoted.

Lender:……………Colonial……..ANZ………..RAMS

Product:..Line Of Credit..Equity Manager…Line of Credit Pro Pack2

Rate at 11/11/08:…7.79%……..8.32%……….7.49%

App Fee:……………….$600……….$600………….$600

Reg Fees:……………..$12 pmth…..$150 pyr……..$300 pyr

Split Acc’s:……………..Yes…………Yes…………….Yes

Credit Card:…………….Yes………..Yes……………..Yes

Cheque Acc…………….Yes………..Yes………………Yes

Internet Banking:………Yes………..Yes………………Yes
Interest Only:…………..Yes…………Yes………………Yes

As you can see there is quite a difference in current interest charged and yearly fees. I currently favour the Colonial Product, but my broker is leaning me toward the ANZ. He feels the ANZ product offering is much more clearly defined. A higher rate yes, but ultimately easier to manage. This is his opinion, and my circumstances will be vastly different to many. The important thing here, is that I have complete confidence in my broker. I think I am going to go with his recommendation.

Lowest rate is not always best! But don’t take my word for it, contact a reputable broker and have a chat. They are a lot like the old fashioned Bank Manager. They want to help and they want your ongoing custom.

I am about to jump ship and refinance my line of credit. I use my line of credit as the base loan for my property investments. I leverage the equity in my home to grow my wealth in property. I always use a mortgage broker to find the best rate and deal for my circumstance. I am not happy with my currect lender as they have been tardy passing on the rate cuts and seem ambivalent to my welfare. They gotta go!

What is a mortgage broker and what can they do for me?

A mortgage broker is like an old fashioned Bank manager with a special difference, they are not tied to a certain Bank. Like the old Bank manager, they will:

Be available for personal interviews where you can let them know your lending requirements and provide a professional service to help manage your finance needs.

They will then talk you though the home loan options that may meet your requirements.

They will source the application paperwork necessary to secure your home loan and act as your representative in complex negotiations with lenders.

So, if you need a mortgage overhaul or need a new home loan to purchase your own piece of earth, then you might want to consider using a mortgage broker. A mortgage broker can save you valuable time and money. Two very valuable commodities.

A few post’s ago I started to extol the virtues of rental property investment and that I thought there were going to be some outstanding opportunities on the horizon.

Well, unless you’ve been living marooned like Robinson Crusoe on an Island in isolation for the last year, I’m sure you’re aware of the US credit meltdown, and its domino effect on the economies of the world. A new style of economy is coming, and I am now doing a John Howard style back flip.

Don’t get me wrong, I am still bullish for Australian residential property for the long term, but with such a high percentage of our workforce now employed on a casual basis, and consumer demand on the wane, the short term outlook is now very cloudy. Timing is nearly as important as location in the current financial climate. Move to soon you, and you may get badly burned, especially if you have a short term outlook.

It is now a perfect time to review your current loans, credit cards and spending habits. Interest rates are coming down. Call your mortgage broker, organise a sit down, review your mortgage suitablility and see what’s available. If you can better your cash flow at the moment, you may well be in the box seat to take advantage when the new economy emerges.

Opportunity is a funny word. The Websters dictionary definition is: 1 : “a favourable juncture of circumstances 2 : a good chance for advancement or progress.“ The current credit crisis I believe offers itself to both definitions. So for property investors the credit crisis means: “opportunity”.

There are several property investment opportunities currently presenting, in a few months there will be a dozen or so. You don’t need to rush out and slam a deposit down on just any piece of land. The opportunities I talk of will be available over the next five to seven years and will make a lot of thinking mums, average blokes and generation y kids wealthy.

The first step any of us need to take is to decide to be wealthy. Property will just be the means. Once you decide to be wealthy, get yourself a hard bound personal journal and write down in your own handwriting, the type of home, income and lifestyle you want to be enjoying in ten years. Date your entry and hold your image in your head. Every two months or so review what you have written, edit your entry if you want, but create and hold the image in your head.

The first opportunity presenting is that of property development. With many people in a panic about the their future, some very good property, with excellent development potential, is becoming liquid and available for the first time in two decades. Remember, property development does not necessarily mean building or construction. Property developement is really about increasing the value of your property purchase by any means available and managing your mortgages!

More about property development in my next post. In the mean time contact your mortgage broker and find out what your lender is doing about reducing your mortgage rate. Historical interest rates reveal a lot about the opportunities coming our way.

It is official, banks are making it tougher to get a home mortgage.

Despite the bail out from the Federal Government to free up lending, it seems some of our major banks have not got the message. A client reported to me today that she had been knocked back for a home loan by her bank (One of the Big Four), despite only looking to borrow a maximum LVR of 77%.

LVR is the abbreviation for the lending term Loan to Valuation Ratio. Like other ratios LVR is expressed as a percentage and is calculated by dividing the amount you need to borrow by the lenders valuation of the property used as security.

Eg if want to borrow $400,000 and your property is valued at $500,000. LVR would be (400,000/$500,000)x100 = 80% Generally an LVR of less than 80% is attractive to most mortgage lenders. The higher the LVR the riskier the proposition for the mortgage lender.

Now there are many reasons why a mortgage lender declines an application, but after reviewing the details I am at a loss to understand their decision and have referred my client to my mortgage broker. I will report further on this matter.

So is this an indication of how the major lenders are going to react to the current crisis? I hope not. The bail out and deposit guarantee was provided so they would lend money and help the economy grow. Could it be they are now a bit gun shy? A smaller bank I could understand, but the big four must do their bit. They have been taking for a long time, it is now time to give a little back.

Please don’t be discouraged if you ever get a knock back from a home loan mortgage lender. Get yourself a competent mortgage broker. They will go the extra mile for you, leave no stone unturned, in their efforts to help you get the home finance you need.

Is The Main Stream Media Talking The World Economy Down for Better Ratings

The main stream media has been responsible for a lot of unhelpful babble in recent days, especially in the relentless, unthinking, 24/7 TV media. The pretty talking heads continually drop doom and gloom prophecies as if they were experts. The truth is they are just filling the gap between commercials. But the panic they cause and the harm they do at grass roots level is criminal. Ordinary peoples super funds diminish because of their ill informed, trivial, bs banter.

Don’t listen to them property owners. Rates have come down, lending will resume, shops will sell stuff, people will buy new cars, bread. milk and need a roof over their heads.

Mortgage holders rejoice for there will be less mortgage stress. Start planning your next property move, Ring your mortgage broker and refinance for a lower rate if you can,visit your land agent or just tour an area you think has growth potential. Laugh in the face of all this media frenzy. They will have an expose on the plight of gay whales, some new financial disaster or a new war to highlight soon and will go back to their ridiculous reporting of the daily fluctuations on wall street. Please ignore the hype. Property was and will always be the king of assets.

To quote Denny Crane: Never Lost, Never Will”. That’s how I feel about property. (That’s property with some land under it, that may, if need be, developed.)