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.

QBE – lmiBAROMETER Annual Mortgage Report

If you haven’t had a chance to read it already, the recent QBE (major Lenders Mortgage Insurer) annual Mortgage Report gives a good insight on the current trends and perceptions of the mortgage and property market.

To view the full report click here

The report aims to provide information on circumstances affecting the mortgage and property markets in Australia and provides a disection of each state. The report also reveals the impact of the recent natural disasters on mortgages and property.

Here are a few of the results from the survey and study to produce this report;

74% of respondents say they are intending to purchase property in the next five years with 29% intending to do so by the end of 2011.

38% of respondents think 2011 will be the best time to purchase a residential property and of these, 69% see the ideal time being within the first six months of the year

The survey shows the average property buyer has a deposit of 20.7% (as a proportion of the purchase price) and is intending to borrow an average of $355,573.72, with the average maximum price being $513,504.17 and the average deposit size being $97,257.58.

62% of respondents agree that getting into the property market now is more important than saving a bigger deposit and 58% agree that property prices will increase strongly over the coming three years.

Property investors are least concerned (as compared with other segments of respondents) with being able to split between fixed and variable rates (4.5 out of 10) – an interesting finding given the usually savvy nature of investors. All other segments of respondents placed packaged and fixed rate options along with the ender’s brand as the least important factors.

Candice Turner – Mortgage Consultant

When I speak with some of the locals on the Sunshine Coast about the Sunshine Coast Hospital, I am quiet often meet with some fairly colourful negative feedback, this is understandable given the locals have been promised a Hospital for the past 20 years.  

Today the state government is set to finalise the deal with Ramsay Health Care to develop the Sunshine Coast’s new private hospital at Kawana.

The second piece of great news for the Sunshine Coast areas is the state government will call for tenders for the Sunshine Coast’s new $2 billion Sunshine Coast University Hospital within the next two weeks.

The Sunshine Coast local economy has been in ‘struggle town’ for sometime. The Hospital is going to be one of the major factors to move the local economy in the right direction.

For further information, follow this link.

• The RBA announced yesterday they yet again left the official cash rate unchanged at 4.75% for the fourth straight month.
• With the lending market continuing to increase in competition, one of our Mortgage Managers has dropped their standard variable rate across their non-bank funded loan suite, now offering a Full Doc Pro Pack Rate of 6.99% with an annual pro pack fee only and no other set up costs or ongoing fees.
• Other major Lenders have reduced their 2, 3 & 5 year fixed rates.

Candice Turner – Mortgage Consultant

We are hearing more and more real life stories of people failing to get finance whether it be for a purchase or refinance, which leads us to why using a Mortgage Broker is such an advantage opposed to limiting yourself to the one Bank or Lender. 

Before I move share the advantages of using a Mortgage Broker, I want to share a quick story with you that gives a good example of why using a Mortgage Broker is so important.

Recently we spoke with a local Real Estate Agent that explained she had a client purchasing a property and was trying to get finance through one of the major banks. This client was a long term customer of the major bank, however was declined finance for the purchase.

The client then successfully completed their finance through a Mortgage Broker. 

The result of the finance being successful with a different lender, infuriated the long term client of the major bank, which lead the client and Real Estate Agent to believe this major bank was useless.

After hearing this, we explained to the Real Estate Agent, that this is the exact reason why using a Mortgage Broker is so important. This particular major Bank isn’t useless, the client obviously didn’t fit within in their lending policy.

Using a Mortgage Broker allows the client to be placed with a Bank or Lender that best suits their circumstances rather then being limited to one Lender’s loan product suite.

Here are a number of key advantages as to why you would use a Mortgage Broker;

Mortgage Brokers give you choice

We have a panel of Lenders from which we can recommend a loan. We have to become accredited with the Lender to offer their product, and are required to keep up-to-date with their latest offers.

Mortgage Brokers can help find the right loan

The best deal is not necessarily the cheapest rate. As a good Mortgage Broker we will examine your circumstances and future plans to recommend a loan that is right for you. Having an appropriate loan which works for you can help you build wealth.

A major key point to consider is when you try applying for finance through a bank branch yourself that may lead to a decline and then attempt the same thing with a different bank branch, which again leads to a decline, your potential to getting finance can be dramatically affected by the number of hits on your CRAA Report as it appears you have been ‘shopping’ around.

As already mentioned above, a Mortgage Broker has a number of Lender and Loan Product options, which creates a number of options in setting your finance application with the right Lender to suit your circumstances the first time. 

Mortgage Brokers can save time

The choices now available in the Mortgage market can seem limitless and completely overwhelming. You can choose to research the subject, the Lenders and their products yourself, or work with a Mortgage Broker who already has that knowledge.

Mortgage Brokers can help you avoid pitfalls

Many products seem to offer a great deal but they could have penalties, fees and charges you may not be aware of. Or, they may not offer the flexibility you require in the future. We can help you avoid taking out a loan you might later regret.

Last but not least – Using a Mortgage Broker that ‘walks the talk’

There are Mortgage Brokers and there are Mortgage Brokers……

While there are many Mortgage Brokers in the industry, it is the same concept of why you wouldn’t seek advice for investment in shares from a Financial Advisor who doesn’t personally do Shares and vice versa for property investment. If they are not passionate about the same investment path as what you want to go down, what type of strategy or encouragement will they provide you to reach your goals.

Being property investors ourselves, we can demonstrate to you, how one property investment strategy compared to another (working with the same scenario) could limit/maximize your growth capacity by tens of thousands of dollars & restrict/enhance your future finance opportunities.

As a valued affiliate member, please feel free to contact me on candice@harvestinggroup.com.au or call my mobile on 0409 547 777 should you wish to discuss any finance matters.

While we have seen many ‘special’ offers amoungst the major Banks and Lenders, a great come back for all First Home Buyers, Home Buyers and Investors is the reappearance of the 95% LVR (loan to value ratio) for not only existing customers but now for NEW to bank customers. This also comes with less restrictions being able to be applied to owner occupied purchases, investment property purchases and in some cases refinances.

Candice Turner – Mortgage Consultant

As property managers, we often get asked what tenants look for when selecting a rental property. So to help you all out we have listed below the most six most common questions we get asked about potential rental properties by a tenant.

• Does the property have fans or air con? This would have to be the most common question we get asked. Obviously with the South East Queenland climate this is important to tenants as they want to be comfortable within their home.
• Is the property fully fenced? A very large number of our tenants either have children and/or pets that they are looking to accommodate, so a fully fenced yard is very important.
• Is the property close to schools, shops and transport? Tenants like to be within a close proximity to these amenities, as they don’t want to have to travel far to drop the kids at school or to pick up a loaf of bread or a carton of milk
• Do the bedrooms have built in wardrobes? Most tenants do not have the old fashioned wardrobes to put in bedrooms so they require built ins. Built in wardrobes also mean that there is more room in the bedroom for the tenants furniture
• Does the property have a dishwasher? We all lead very busy lifestyles, so the convenience of a dishwasher is a big draw card when renting a property.
• Is the property tiled or carpeted? We have found that the majority of our tenants prefer to have tiled living areas as it is far easier to keep clean. However they do still like having carpeted bedrooms.

So as property investor it is important when looking at purchasing a investment property or renovating an existing investment these are just a few simple yet effective ideas to keep in mind to add value, appeal more to your prospective and existing  tenants. It will also maximise your rental return and can potentially reduce vacancy times to a minimum. As investors it important to have the maximum rental return on our property investment. 

Luke Turner

Principle Licensee

Lenders Mortgage Insurance (LMI) insures the lender (not the borrower) against non-payment or default on your residential property loan.

While it protects the lender against loss, if you stop making your mortgage payments, Lender’s Mortgage Insurance also makes it possible for purchasers to buy a property with as little as a 5 per cent deposit if eligible.

When you take out a loan greater then 80% of the purchase price for full doc loans or greater then 60% for low doc loans, you pay a once-off fee to the lender, which is paid upfront or in most cases can be capitalised on top of your loan. The LMI fee can vary according to the amount borrowed and the size of your deposit.

While Lender’s Mortgage Insurance protects the lender, there are certainly benefits to the property buyer. Whether you are buying your home or investment property, it allows you to get into the property market sooner with a lesser deposit.

Here are 2 example of when LMI is applicable and LMI is not applicable; First Home Buyer First Home Buyer Purchase Price: $300,000

Purchase Price: $300,000

LVR: 90%                                               LVR: 80%                                                                           

Loan Amount: $270,000                      Loan Amount: $240,000

LMI Payable: $4347*                            LMI: NIL               

Deposit: $30,000                                    Deposit: $60,000

*LMI fee in table is an estimate only and can vary depending on the individual lender’s requirements.                                                                                                                                     

* Table does not include other associated purchasing costs.

The table above shows you the vast difference between the amounts of deposit you will need to contribute when purchasing a property at the different LVRs (Loan to Value Ratios).

The great benefit of borrowing more then 80% is you do not have to put all your hard saved cash in as a 20% deposit, which then leaves you with nothing left over.

This then allows you to keep a portion of your savings as a ‘buffer’ in an offset account, thus saving interest on your home loan or even using it for the purchase of new furniture and improvement to your property.

If you are looking at buying your first home, upgrading or investment property and need a Mortgage Consultant to assist you with obtaining finance and guidance through the stages of your purchase, call 07 5493 1655 or email candice@harvestinggroup.com.au today. 

Candice Turner Mortgage Consultant

1. Truly understand the principle reason for purchasing residential property. LEVERAGE. Look at the % return on your own $ invested, not the % return on the investment in its entirety.

2. Residential property is one of the few investments where you can access equity in your residential property without having to sell, allowing the capital growth to continue. Quote “Compounding is the most powerful force in the universe” – Albert Einstein

3. For long term investment, always purchase median residential properties in high growth areas. They’re safer for many reasons – easier to rent, resell, revalue & refinance.

4. For short term cash residential investment, be aware that a successful strategy may exist almost anywhere, even over your back fence.

5. Be prepared to “look outside the square” in other words be a problem solver rather than a problem maker. This can lead to a successful investment strategy that others have found too hard.

6. For successful property investing, it is crucial to understand the finance behind it, and to have a wealth building yet safe finance strategy in place.

7. Although sometimes your strategy will be to sell, the key to long term financial security is to buy and hold property for the long term.

8. Be aware of WHO you take your “well meaning” advice from. Always, always, work and be guided by like minded people. People who are already successful in the field you wish to succeed in.

9. Easy come, easy go….At all times, conduct your due diligence, own your own figures & know where you are at.

10. Positive cash flow properties versus negatively geared properties, know the difference and at times, how they can both work for you.

11. Correct property selection is critical. Two properties in the same street can vary by $$$ in potential/capital growth for many reasons.

12. Renovating – Keep it simple, uncluttered and always use neutral tonings to satisfy the majority.

13. Treat mistakes as learning curves and do precisely that, learn from them.

14. Treat others as you would want to be treated. Adopt this attitude and it can only help your investing journey be not only smoother but ultimately more successful.

15. Don’t indulge too much in “analysis /paralysis” You don’t have to know everything about everything before proceeding. Allow your professional team, eg mentors, mortgage brokers, buyers agents, accountants, solicitors, property managers etc to do their job.

16. Be open minded, understand the meaning of “Your mindset can be your greatest asset or your greatest liability, it is your choice.”

17. Know and understand the property cycle as your investing strategies will need to adapt and be modified according to what stage the cycle is at.

18. Negotiating is an acquired skill. $$$ can be made or lost. You can learn it or you can pass the job onto your buyer’s agent which is just one of the many vital services they will perform for you.

19. Diversification of your property portfolio is very important for many reasons including less risk, savings, and opportunity to experience continued capital growth more often as different areas move at different times.

20. Legal entities and structures for purchasing are very important to understand and have in place before purchasing. Otherwise, multiple issues can arise.

For further information, why not call one of our dedicated staff on 1300 797 181 or email info@harvestinggroup.com.au