According to a recent mystery shopper survey conducted by CoreData over a 6 week period, Mortgage Brokers came out on top being the most trusted when providing a home loan compared to a Bank or Credit Union.

The survey was based on Assurances, Compliance, Quality, Understanding, Intention, Reaction & Environment, with a positive result of being rated higher in 5 out of the 7 catergories and scoring impressingly on Assurances, Understanding and the greatest point of difference with knowledge of Compliance.

As you may not be fully aware of what ‘Compliance’ is within the Mortgage Broking Industry, it is the regulations we have to abide for ‘responsible lending’ to ensure you are not engaging into a credit facility that you cannot afford or is not appropriate for your needs.

Have you considered refinancing to get a cheaper interest rate to help with cash flow but the cost and minimal decrease in the interest rate isn’t worth it???

Another great way to help reduce your interest repayment is utilising an Offset Account.

An Offset Account generally works like a normal bank account, where you can place all of your savings & income into, which then ‘offsets’ against your home loan.

As interest on your home loan is calculated daily, any balance in the offset account is ‘offset’ against the amount owing on your home loan and you only pay interest on the net balance. 

To give you an example of how a 100% offset account works;

Home Loan – $100,000

Offset Acc – $10,000

= You only pay interest on $90,000

With the continual competition amongst the banks to acquire your business, there is now opportunity to borrow up to 85% LVR before requiring Lender Mortgage Insurance.

Traditionally LMI is payable when borrowing over 80% LVR for a full doc loan to protect the lender in the instance you defaulted.

This allows home buyers &/or investors with a clean credit history and secure employment base to maximise gearing before being charged an LMI premium, whether it be for a purchase or refinance.

It’s important for investors to understand the effects of property depreciation and how it can change an investment, advises BMT. And with the new financial year just around the corner, now is as good a time as any.

The Australian Taxation Office allows investors to use two alternative methods of depreciation:

• Diminishing value method – which accelerates depreciation deductions quickly.
• Prime cost method – which spreads the deductions out over time.

According to quantity surveyors BMT, the long term intentions of the property investor will determine which depreciation method will be most suitable for them. They can only choose one though.

Each method affects the long-term cash flow position in a different way, says BMT.

“Under the diminishing value method the deduction is calculated as a percentage of the balance left to deduct. The deductions will be higher in the first five years and diminish over time. This is because a greater proportion of the asset’s cost is being claimed in the earlier years of the effective life.”

“Under the prime cost method the deduction for each year is calculated as a percentage of the cost per year. This results in a more even spread of deductions over a longer time.”

The diminishing value may be an attractive option for an investor who purchases a property and wants to sell it in around five years time, because it provides higher returns over the earlier years.

However, if the owner plans to hold the property for a longer period of time, then the prime cost method might be more suitable because it provides a constant long-term projection of what the investor’s tax deductions will be.

But BMT says most investors employ the diminishing value method on both short and long term investments because depreciation deductions are cumulatively higher over the first five years of ownership, when they want or need deductions most.

An example of how the diminishing value method compares to the prime cost method in deductions obtained per year for ten years is as follows: 

SOURCE: BMT; figures are based on a 15 year old house with a purchase price of $400,000.

Once again we are back to the great debate of whether to have a variable rate or fixed rate.

With the recent decrease across most lenders fixed rates, many home owners have taken up the current offers relieving the uncertainty of which way interest rates will go.

Whilst the current fixed rate offers may seem appealing, the guess is whether or not you’ll be held paying a higher interest amount on your mortgage should we see a rate reduction by Christmas as speculated amongst the Finance Industry and Westpac bank.   

At the end of the day, we cannot predict exactly which way interest rates will go. Whilst the RBA may drop the official cash rate by Christmas, it doesn’t necessarily mean the banks will follow.

To fix or not to fix needs to be your personal decision based on your individual circumstances. If you need that comfort of knowing how much your repayment is per month and have trouble with the uncertainty of a variable rate then perhaps a fixed rate is for you. However if this isn’t a problem, a variable rate may be more versatile or a combination of both.

Candice Turner

CURRENT LENDER & LOAN PRODUCT OFFERS

Homeside

- have lifted their Genworth (mortgage insurer) location guide and have an open post code policy, now lending up to 95% LVR in all locations for approved security types.

- have also increased their DUA (Delegated Underwriting Authority) to 95% LVR

- Nil App Fee, Nil Valuation Fee and Nil Split Fees, 100% True Fee Free Offset Account, only $10 per month and rates starting at 6.90% – the Homeplus Home Loan is one of the most attractive offerings in the market

Suncorp

- will lend up to 95% with NO GENUINE SAVINGS REQUIRED. 5% deposit & costs can be a combination of savings, FHOG, gift from parents & even the $10k QLD Government Building Boost Grant!

Bankwest

- are now offering further tiered interest rate discounts on their Premium Selection home loan products from as low as 6.75% pa.

Macquarie Bank

- has introduced a Family Guarantee product as a borrowing option on their Classic loan. For those who have little or no deposit saved, you can now get help from your immediate family when borrowing with Macquarie. – current rate 6.99% pa

Candice Turner

The Queensland Government $10,000 Building Boost Grant is now available to buy or build a new home in Queensland – 1st of August 2011 to 31st of January 2012

Available to eligible First Home Buyers, Home Buyers and Investors!

First Home Buyers will receive the $7000 FHOG and the $10,000 Building Boost Grant, totalling $17,000 to put towards the purchase of your new home!

Home Buyers and Investors will receive the $10,000 Building Boost Grant

For more information and to check your eligibility go to http://boost.treasury.qld.gov.au

With the new financial year, now is a great time to start getting your rental property information together to ensure you benefit from the allowable deductible items.

Below is a guide of the deductible and non deductible items for you to take into consideration.

Checklist sourced from API.

Guarantor loans are now the only way to borrow 100% of the purchase price since the traditional 100% home loan was removed from the lending market.

With the assistance of a guarantor you can borrow over 100% of the purchase price which will allow you to buy a property and also pay for purchasing costs such as stamp duty.

The different types of guarantees are;

• security guarantee – This type of guarantee the guarantor uses property that they own as additional security for your loan. If the guarantor already has an existing loan on their property then in most cases the bank will take a 2nd mortgage as security. This type of guarantee is generally used when first home buyers are buying a home, have sufficient income but no deposit or minimal savings to put into the
  purchase.
• income guarantee- This type of guarantee the guarantor does not provide property as security but provides their income to be used to assist with the repayments. This type of guarantee is generally used when someone is trying to buy a house in their name but is receiving help from someone who will not own the house to make the repayments. The income guarantee allows the bank/lender to consider people in these circumstances who would otherwise be unable to qualify for a loan. Usually this type of guarantee is only for a small period of time where the borrower is on an initial low income period, such as an apprenticeship/traineeship, student or probation. The Guarantee is taken off, once your income is sufficent to service the loan. The maximum you can borrow is generally 80% of the property value with an income guarantee in place unless there is also a security guarantee (see below). Note that not all banks/lenders will consider the income guarantee, and usually only on a case-by-case basis.
• secuirty & income guarantee – This is a combination of the above two guarantee types. A security and income guarantor is most often a parent helping their child who is a student or who has a low income to buy their first property.
• family guarantee – This is the name given for when the guarantor is directly related to the borrowers. Banks refer to this as a “parental guarantee”. Grandparents, siblings and other family members as guarantors can be considered on a case by case basis.
• limited guarantee – A limited guarantee is where only a portion of the
  loan is guaranteed by the guarantor. This is most often used with security
  guarantors so as to reduce the potential liability secured on the guarantor’s
  property. Guarantees can be either limited or unlimited, depending on both the guarantors wishes and the lenders requirements.

As each Bank and Lending Institution offer their own guarantor supported loans and requirements the common example of a limited ‘security’ guarantee structure is as follows;

80 / 20 Example (plus costs)

Whilst Joe’s parents are providing the limited security guarantee, Joe Blow is responsible for servicing the full loan amount. In the example above, the loan repayment would be based on the full loan amount of $300,000.

If the above type of structure could help you purchase your home sooner than you
thought, please contact Candice today, to discuss further or email candice@harvestinggroup.com.au.