Australian Mortgage and Loan Information

Big Bank Rip-Off Exposed

The bad news of the day is that the RBA has increased its cash benchmark
rate by 25 basis points (to 4.25%).

The RBA has been spooked by real-estate data indicating an Australia wide increase in property prices.

Making it hard to borrow or hard to repay is one way to curb home owner or prospective home buyer enthusiasm.

So what can we do? Already Australia’s biggest home lender the Commonwealth Bank, has announced that it will increase its variable rate by the .25% starting this Friday. The rest of bailed out banks will no doubt follow suit in the days ahead.

Try and pay off all your loans and credit cards as quickly as possible. Chop up your card if you can, or at least take some time to understand how a debt consolidation loan may help. Sell your second car, car pool or take the bus. Switch to Naked DSL instead of a land telephone line. Search for a cheaper power supplier or embrace solar energy. Put in a water tank. Grow a veggie garden. Start jogging instead of going out. (You can meet some really interesting people jogging on the beach.) Brew your own beer. Get the idea? I think we are headed for a big recession, but the RBA thinks it has some divine providence after it flukes the idea of dropping of interest rates in 2008 and 2009.

Better to be ready, and who knows, luxury items and big TV’s may be cheaper next year.

Foot note: When rates go up banks make mistakes. Check your Home loan statements

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.

Check Your Mortgage Documents

Unfortunately, I know someone who is having to sell their home at the behest of a Lender. This is real mortgage stress.

The lender has demanded a loan be repaid or refinanced within 30days. So much for the mortgage holiday deal?

Their problem stems from having a cocktail of home loans on their residential property. One of their loans is a line of credit. Unfortunately they did not read their mortgage documents thoroughly. By not keeping their line of credit mortgage active and under it’s limit, they have trigged the lenders get out clause. If they can’t refinance the line of credit, the other home loan will also have to be refinanced. They had something called an all monies contract.

I have referred them to a mortgage broker who assures me he can help them. However, I think this situation highlights the need to read the fine print of your mortgage documents and get advice if you don’t understand what you read.

In the current economic climate, lenders will be inclined to manage their risks quite harshly. So please get your mortgage doc’s out and get an understanding quickly.

Private sector house approvals fell 13.1% in December 2008 according to the Australian Bureau of Statistics.

Why is this good news? Less new dwellings being built, mean tighter supply and a probable increase in value for current stock, well that’s the theory anyway.

The reality is Australian home affordability is out of kilter with wages and incomes.
So instead of home ownership being right of all Australians, it is for now, an elite privilege.

I also see the Government’s tax revenue (It’s major income source) is down 19% for the September 08 quarter, yet it’s expense’s rose across the board. The Governments credit card is close to maxed out. Tax revenue will have to increase, or we may find the government shedding jobs. What will that do for property values?

My research into commercial properties has revealed the market to be dead in the water. Sellers are asking premium price, buyers in the main are adopting a wait and see policy.
Drive around a factory precinct near you, count the deserted properties. My gut feel is for a 50 to 60% drop in values for these properties shortly.

It is time to re-evaluate your banking, you want to cut fees, consolidate your debts, check out better deals, whatever saves you money. Get some loan checking software and use it to check your credit cards, business loans and home loans.

Government stimulus package and historically low lending interest rates will buy some time, but the risk of a massive correction in Australian house and commercial property prices is as high as it has ever been since the great depression. Over valued and in many cases in poor condition, Australian property has become decidedly on the nose internationally.

The International Monetary Fund has for some time voiced a considered opinion that: “Australian property is among the most overvalued in the developed world.“ International investors have heeded the IMF’s warning and are quitting their Australian holdings in the droves. New enquiries have all but dried up.

February 2009 is the perfect time to ready yourself for the turbulent time ahead. Consolidate your debts, sign your tenants to a longer lease, crack down on tardy payers. Repair and maintain your properties to keep them in top condition. Check your mortgage interest rate, get the lowest rate mortgage available or convert to interest only if you can and get some quality mortgage checking software.

A drop in Australian house and property values is imminent, it is not an if but a when the bubble will burst.

Four years ago the OECD (The Organisation for Economic Co-operation and Development) released a report revealing that: “AUSTRALIA had by far the most overvalued houses in the Western world, with prices 52 per cent higher than justified by rental values.” The report went on the say: “Australia was one of four countries where house prices were most out of line with fundamentals and that a correction of these inflated prices could generate an economic downturn, affecting growth, employment, government budgets and bank lending.”

So now in 2009 four years later we are in the middle of the biggest financial meltdown in the history of the world and our house prices have increased? I know Australia is a great place to live, but it just does not add up. Successive governments have subsidised the property bubble to an extent with first home owner grants and bonus’s, but that makes up a small part of the overall market. Why does our bubble continue to inflate, when will it burst and what will be the fallout for Australian residents and home owners? What will it mean for our major lenders and superannuation funds?

Consolidate your debts as soon as possible, get ready for a some rough property investment weather, but be ready to take advantage of the recovery if you can.

Hail the Reserve Bank Board for acting quickly and decisively on interest rates.

As a result and despite all the doom and gloom, bail out and prop up talk, property prices and auction clearance rates seemed to have stabilised.

Experts are predicting home loan rates are going to fall way below any previous historical low of the last fifity years. So, It is time to evaluate your current or proposed mortgage, or test “what if” scenario’s if you are considering refinancing or consolidating debt.

Loan calculators and other recourses available on the web can help you test these “what if’s”. And the best thing is they are generally free and flexible enough that you can do things like calculate the effect of interest rate rise and falls or compare loans. In most cases you can print out the results. If not then just print the web-page.

Most calculators are easy to use. Generally it is all a matter of putting your numbers in the boxes and then clicking on the calculate button. You can have a bit of serious fun just playing with them. I have gathered what I consider the best Home Loan Mortgage calculators below:

List of Calculators
Loan Comparison
Loan Payment with Amortization Schedule
Mortgage Consolidation & Refinancing
Variable vs Fixed Interest Rate
Debt Consolidation
Accelerated Debt Payoff
Loan Statement Mistake Finder

Has your bank overcharged you? – Download this mortgage software to check your interest charges and claim your refund today!

After watching an episode of CSI last night about a young woman’s attraction and loyalty to a “Bad Boy”, I started to wonder what happens to women who sign loan guarantees for “Bad Boy’s”.

You get the picture: He wants to impress with a flash house, but doesn’t have a steady job, so the love-struck girlfriend signs a guarantee, as he confesses his undying love and devotion while promising faithfully to keep the loan in order until it is paid. However, six months later no payments have been made, he’s gone and the Sherriff delivers a demand for payment to the guarantor! What should an ex girlfriend do?

In the good old USA I gather she can hand back the keys and let the bank worry about it, but how does this effect her credit record?

I am interested if anyone has a comment? In CSI she has him killed for the life insurance, so justice is served. I think!

In Australia, the guarantor has no rights to the property or asset they are guaranteeing payment for. You will need a private agreement with the person or entity you are agreeing to go guarantor for if you want rights to an asset. The minute you sign a guarantee you become legally bound to assume responsibility for the debt, generally both jointly with and as alternate too the loan applicant. You will not be able back out, change your mind or argue that you didn’t understand what you were signing.

For lender’s, a guarantee can be a very powerful and useful document. If the borrower does not pay, you as the guarantor will be compelled too. One missed payment by the borrower could be enough to make you responsible. It won’t matter why the borrower stopped paying, if they cease or are short on their required repayments your guarantee means you said you would pay in their place.

If you fail to make payments after they have been demanded, the lender may take legal action against you to recover their money. As a result of successful legal action a lender may take your house, land, shares, savings or any other things of value to satisfy their debt.

My advice is you should never consider taking on a guarantee, but if you must, make sure it has a limit and get an agreement in place as regards the ownership of the asset. A reputable mortgage broker will have options other than a guarantee if you need to help a family member get into their first home or help a friend in need. Get legal advice if a guarantee becomes your only option.

A Home Equity Loan allows you to turn the equity you have built up in your home into cash to use as collateral for buying bargain priced assets in the current financial turmoil.

National property prices in Australia have surged by more than 60% over the last 7 years giving many home owners substantial equity to borrow against – Equity is the difference between what you owe on your home loan and what the property is actually worth.

Home Equity loans are commonly used to retire and consolidate high interest consumer debt or to purchase expensive items like a vehicle or boat. I think it would be better used to obtain a deposit on an investment property, to renovate and increase the value of your existing home or do what an old guy called Warren Buffet does: buy shares, listed property trusts and other income earning assets.

There are 2 main types of Equity Loans. There is the lump sum cash type where you get a lump sum for a particular project or investment where you start paying interest immediately. This loan could be any one of the types lenders offer like standard variable or fixed rate, but generally means refinancing your entire loan to access your equity. The second and my favourite is the Line of Credit type where you only pay interest on the part of the loan you have drawn down on. This type of loan can be in addition too and sit on top of your existing mortgage. It can also be a low doc loan. If set up properly and kept track of, it can be your loan for life, meaning you should never have to go back to the bank to apply for new loans for investment projects or similar.

If you have good cash flow from your job or business an equity loan can be a great leverage tool to facilitate investment in assets that appreciate in value to increase your wealth.

Call your mortgage broker and check out your equity. The global stock market crash has made some solid companies bargain buys. The equity in your home may be the key to taking advantage of this opportunity.