Due to the global financial crisis, many loan providers have tightened their requirements and lending criteria on mortgage loans. So prior to applying for a home loan, it is important to conduct a research and understand the pros and cons of a home loan. Read on for some helpful information that can help you make a well-informed decision.

Loan providers have removed the accessibility of having 100% loans. This means that borrowers can no longer get the full amount of the purchase price. As an alternative, borrowers must prove to lenders that they have at least 5% of the home loan deposit came from their genuine savings.

Genuine Savings

Genuine savings are funds, which have accumulated over a time period. Most loan providers would require borrowers to have at least three months of financial savings in the bank to get approval for their home loan.

Having regular savings prior to purchasing a property is a good way to start since it can help you build a consistent savings structure and be ready for your long-term mortgage repayments.

What is included in the genuine savings?

Loan providers will ask any borrower to include a proof of savings through bank statements, regardless of whether the funds are from your daily bank transaction account, savings account, or time deposit. Mounting up with your piggy bank is merely not a good option, as lenders will not credit such type of savings.

Depending on the loan provider, a portfolio of shares or even any kind of collateral you have from other properties might be counted to your genuine savings provided that you have owned or operated these investments for at least three months.

Apart from that, funds coming from your First Home Saver account could also be counted to your genuine savings. This type of savings account is an incentive from the federal government to help Australians in property ownership.

What doesn’t count as genuine savings?

Here are some of the things that cannot be counted as part of your genuine savings:

• Funds coming from parents or relatives
• The First Home Owner Boost
• Rebates from builders or sellers
• Profits from selling assets
• Money coming from a personal loan

So, if you are a first-time homebuyer, be sure to attain no less than 5% of the probable purchase cost saved in your mortgage deposit as well as have at least three months on record of your savings to back up your expenses as soon as you start searching for a property. Don’t hesitate to ask the advice about home loans from mortgage brokers in Rockingham.

By: Tom Winterbourn

House rentals in the Rockingham – Kwinana area are firming up to the point where buying a home is looking increasing attractive to some renters.

Rockingham – Kwinana Chamber of Commerce president and Mortgage Gallery owner Justin Smith said the closing gap between weekly rental and mortgage payments was the first sign of a changing house market after several years of depressed values.

Ron Clues, chairman of the Rockingham branch of the Real Estate Institute of WA and principal of Secret Harbour Realty, agreed, saying renters at the bottom end of the market were being tempted by the current low interest rates to look seriously at become first-homebuyers.

Despite the “big four” banks raising commercial rates independently of the Reserve Bank, the higher rental market is making home buying a relatively attractive option.

Mr. Clues said rental prices had jumped since Christmas due to low availability of accommodation.

“Unfortunately, we cannot change rentals on a weekly basis; only when properties have become vacant,” he said.

“There is traditionally a lot of changeover over the summer months, between December and March, when people are looking for rentals for about 12 months.

“And as rentals go up, the bottom end of the rental market firms up.”

Mr. Clues said those paying $300-plus rents in the Rockingham area would find buying first entry homes starting from $300,000 reasonably attractive, with homes at $350,000 to $360,000 at the upper end of the first-homebuyers’ market.

“Buyers would need five to 10 percent deposits and, of course, they would have to pay service charges, such as rates, water and electricity,” he said.

“Definitely, the current low interest rates would encourage renters to do their figures.

“The Rockingham area has affordable housing and rentals, too, but they are becoming hard to get.”

Mr. Smith put the rental vacancy rate in the area at 2.5 to 3 percent.

“If more people are tempted to buy with the low interest rates, more rental properties will come onto the market,” he said.

“A person renting $300,000 house in Rockingham would pay about $300 a week, whereas if buying a property of the same value, first-homebuyers would pay just $80 a week more, plus service charges.”

Most first time homebuyers are anxious to get hold of their First Home Owner Boost increase by end of the year. Starting today, they need to start saving up to make sure that they will have enough deposits to purchase a property and pay for other related costs which will be most probably closer to at most 10% of the property value. Homebuyers must also bear in mind that they need to deal with the increasing interest rates of at least two percent.

Irrespective of whether you have enough money, make a home loan repayment with a higher rate or not, you must carefully pay attention and observe the annual, quarterly, monthly, and weekly expenses. Just like for instance, if an average borrower was to reimburse their home loan at 8%, they can presume that their active monthly repayment for the mortgage would be around $1,850, and will increase to approximately $305. They will now think if they can cope with repayments at $2,155 every month for the mortgage plus their expenses on utilities and food.

What most borrowers might not realise is that dealing with rate increases is just as easy as cutting a night out once in a month or perhaps avoiding paying for a car wash by doing the job yourself. These are small sacrifices that you need to think about, it will definitely pull you closer to reaching your dream – acquiring your own a house. Moreover, once you get the rewards of living in your very own house, you will feel that your little efforts are just worth it.

Needless to say, the benefit of those small sacrifices will differ on how much amount you are planning to borrow and how long the lifetime or term of the home loan is. Nevertheless, if you have taken out a loan and along the way, you feel that repayments are turning to be such a burden, and then you can always look around for other options or shift to refinancing to a much affordable loan. Ask the assistance of home loans experts from Rockingham.

It is just a matter of balancing your decision and knowing what you need most. In addition, do not forget about dealing with the rising interest rates and property prices. Note that purchasing a home does not need to be very difficult, it is just a matter of setting up your priorities and goals.

Majority of homebuyers who apply for a home loan does not have a full understanding of the importance of LMI, also known as the Lenders Mortgage Insurance.

Frequently, homebuyers searching for a mortgage mistakenly think LMI as a result of delayed payments. Nevertheless, it is highly significant that homebuyers should know. This particular insurance coverage could not give them any protection.

LMI is actually a one-off payment to the loan provider and this will take care of the home loan in case a homebuyer would like to borrow an amount that is more than the price of the property.

Hence, the fee insures the loan provider for any kind of deficit in case the borrower will not be able to pay the amount stated in the contract of the home loan. The insurance will take care of the essential difference of the property being sold and the amount still unpaid on the mortgage loan.

LMI – An Essential Insurance

A lenders mortgage insurance (LMI) is needed when you borrow more than 80% of the property’s actual value.

However, this depends on the loan provider. Some loan providers would lend borrowers with more than 85% of the property value and will not require any LMI.

Will the Insurance be added to your Home Loan?

When searching for a home loan, be sure to put in mind that not all lenders will include this fee in your mortgage loan, but there are others who will require you to pay for it.

In the end, irrespective of whether the amount will be included to your home loan will probably make a significant difference to exactly how much money you will need to save.

The thing that homebuyers should think about is if they are satisfied with saving the initial 20% deposit of the mortgage prior to searching around as property prices and rates of interest consistently rise, or if they should pay for the Lenders Mortgage Insurance and jump into the property market immediately.

Although there are many instances where borrowers have waited to save a sufficient amount to avoid the LMI payment, unfortunately, they price of the property tends to increase more quickly than they can save.

The Lenders Mortgage Insurance is considered to be of great help for the borrowers because owning a property without it would definitely be very unrealistic for most people since they might need to save up for a down payment of at least 20% of the property value including the payments connected with purchasing the property.

If borrowers would opt for the LMI, the required down payment would be around 5%-10% of the property value that is much cheaper.

Now, which one would you prefer? Saving up or paying for the LMI? Still confused? Seek the advice of mortgage brokers from Cockburn.

The four-bedroom house that you have along the suburbs could have been useful if your children were at home. However, knowing that they already have a life of their own, most likely, your house will start to get a little too large and unmanageable.

Therefore, it is only reasonable to consider downsizing your property, not just to help lessen the responsibility of taking care of it, but most importantly, gain some valuable returns to repay a mortgage loan or if it has already been sorted out, to increase your savings.

The leaders in this challenging financial market are the investors and those who are open to the idea of downsizing their property. Provided that markets are growing, today might just be the ideal time for you think about coming up with a smaller living area.

Buying Before Selling

If you have plans on downsizing to increase your monthly gains, buying first before selling is highly recommended. Meaning, you are buying the property at the current rate and sell it later at a much higher value.

It is also important to gain access on the appraisal record of the property in question so you will be able to determine the amount you have spent through the years. You can also consider delayed settlement if you have already found a new place to live in. This way, you will have some time to sell your current house. However, if the seller will not give you a delayed settlement, you will be forced to pay for the property.

Another option is to apply for a short-term mortgage loan. This is of course if you do not have an existing mortgage. The downfall is the fact that some loan providers are hesitant on lending borrowers for a short period of time.

Double the setback

Many people would prefer to buy a property at the place where they currently live, since they already have all the right connections and resources in the area.

However, if you opt to downsize into a different location, probably out of town then you could enjoy the doubled benefit of purchasing a property in a much cheaper market and paying less charges for a smaller property.

Downsizing Alternatives

Some people consider buying two properties at almost the same time using the proceeds they gained from their own properties, like acquiring a beach house while at the same time getting a new pad in the city.

Another option is by purchasing two units from the same area, one unit for investing and the other one for living in. Alternatively, acquire a good home for your children while they are still in college. You might also want to consider living in a smaller property and make use of the proceeds to help catch up with any deficit in your pension savings.

Regardless of what you are doing, if you are a parent with no child at home, it is most likely an ideal time to think about downsizing to put together your retirement savings and invest in your future plans.

Learn more about downsizing a property from expert mortgage brokers from Rockingham and see the returns of your investment.

Before you purchase a property investment, there are a few key elements of the strata scheme, which you have to learn:

• Property Insurance

Under that strata plan, the entire property is protected with an insurance coverage, in which case, we highly recommend that you need to insure your personal belongings with a separate insurance coverage.

• By-laws and Restrictions

The by-laws are specific set of rules that each individual living under the strata scheme is required to follow. It is a standard law by which those living under the strata plan are differentiated from those owning a personal property. The by-laws are created as a resolution to issues concerning pet keeping, noise management, and parking privileges.

• Pet Keeping

There are particular apartments or unit developments under the strata scheme that prohibit pet keeping. If you already own a pet, it would be ideal to look into this issue before proceeding to buy a unit.

• Parking Privileges

Sometimes, parking privileges in a common property is likely restricted especially if there is no consent from the Owners Corporation. Thus, if you own two vehicles and you are only allowed to have a single parking space, you are given two options, that is, either you park your other car on the street or pay for additional charges as penalties.

• Noise Management

If you love hosting parties, then living in an apartment may not be suitable for you – unless of course all the tenants within your building love to party too. Under the by-laws of the strata scheme, anyone who would like to host parties or gatherings has to take into consideration the right to privacy of all the other tenants, to have a peaceful and unruffled living environment. As one of the tenants, you’re accountable for the behaviour of your visitors as well.

• Floor coverings

If you have found an ideal apartment, examine the floorboards if it suits your taste. Otherwise, better ask if installing new floorboards is covered under the scheme. You ought to think twice if you’d like to forgo your property investment.

• Tenants

If you are planning to move in to another home and put up your current unit for lease, make sure that your tenants will abide by the current rules under the strata scheme.

Prior to purchasing a property investment, it is ideal to conduct your own research and check all the records by which your property may be subjected to. There could be provisions within the strata scheme that can greatly affect your ownership.

There are also companies who specialises in managing strata schemes. They usually charge a small amount for their services and provide you with an informative report detailing all the relevant issues and provisions you need to know about.

Here are the basic aspects of the strata scheme that you will need to investigate:

1. Strata Roll – this is to guarantee that all the details of the current unit owners are correct and updated, including the levies.
2. General Documents – to know if there are disagreements between the owners and what is the proposed legal action from the Owners Corporation to address the issues which could possibly affect any unit owners way of living.
3. Updated Financial Statements – to check if the scheme is not involved in any debt and that there is a sufficient fund for future emergency repairs.
4. Existing Insurance Policy – ensures that the property has an insurance coverage that would protect your rights and privileges as co-owners.
5. Strata Plan –to determine what the boundaries of the common properties are, and to be aware of any restrictions and limitations of the use of any common property which can affect the way of living of any owner.

For additional information regarding strata living and strata schemes, better ask the assistance of the local authorities in your preferred territory or state. This will be the ideal step in determining if an apartment unit is desirable to live in or otherwise. Remember also to ask the advice of a legal professional or an expert mortgage broker in Rockingham before signing any contract and making deposits.

Some people prefer the comfort of living in apartments or property units. However, it is essential to know what you are investing in especially when it has something to deal with strata scheme. Purchasing a property investment, either through a home loan or a business loan that has been acquired with a strata scheme is very different from buying one, which has none. This is of great concern especially for those who are planning to live in it. There are laws that govern this type of property ownership, and it would be very helpful if you know all the relevant provisions before signing a purchase contract.

Strata Scheme – What is it?

A strata scheme is a property or a building or a collection of buildings where each tenant owns a small part of the property (unit), sometimes referred to as a lot, and where there’s also a common property in which every unit owner has a share of ownership over. The Owners Corporation is the body which represents the owners of the lots/units, and the one which organises the strata scheme. Most often, the body hires the services of a licensed strata managing agent to execute the daily process of the strata scheme.

Important Things to be Aware Of

What does each owner actually own?

The significant difference between owning a property and buying a unit in a strata scheme is that most of the roof, floorings, and exterior walls are not owned by the unit owner. These property features are considered as a common property and are owned by the Owners Corporation. They are responsible for the maintenance of the common property. Hence, if a unit owner would not be able to pursue any renovation in the property or install air conditioning units unless approved by the Owners Corporation.

Most commonly, in a strata scheme, unit owners particularly own only the interior of the unit but not the whole structure of the property. The roof, floor, four main walls, and ceilings are considered as a common property. In other words anything that is included inside the airspace of the unit, the furniture and fixtures of the unit, belongs to the unit owner.

Airspace can extend up to the courtyards and balconies as well. Every unit owner must get an appropriate advice with regards to owning a balcony or courtyard since they would be responsible for its maintenance and other related costs.

Levies

The organisation is responsible for the processes of the strata scheme. The members must manage and establish an administrative fund for the daily operational expenses of the property, and a long-term fund for other future expenses. They must carry out an estimated amount of the expenses needed for the annual strata scheme. The amount will then be divided to the unit owners also known as the “levies”. The levies are brought during the annual general meeting, carried out by a majority vote and vary depending on the amount of common property and its maintenance costs. Levies are carried out based on each unit entitlement and are normally paid quarterly.

Common Properties

Every buyer must pay attention to the building construction of the property since the arrangement of the strata scheme is to share the expenses for the upkeep of the property by paying through the levies. Unit buyers must take a look at the exteriors of the building including gyms, tennis courts, lifts, swimming pools, foyer areas, and many others.

It is also essential for unit owners to attend the annual general meeting together with the Owners Corporation to be able to know if there are new plans, expenses, and updates on the property.

To learn more about property investments and strata schemes, you may contact your Kwinana mortgage brokers.

When you plan to acquire a property investment, the common rule is to base your buying preferences on your objectives, and not merely on your emotions. After all, you will not be actually living in that property.

It is also important to consider the financial capacity of the property, evaluate if the price is good enough, and determine how much the returns would probably be, including the rental vacancy rate and property rental incomes.

In the real estate market, property prices and interest rates are low. In addition, with property rentals looking great, it only shows that property investment is a good move and to change that, it will require interest rates and prices to change as well.

Renowned mortgage experts emphasised the importance of extensive research before investing on a property from a certain area. Investors must consider some demand aspects. Like for example, in Western Sydney, terrace houses are more in demand than apartments. So if you are looking for a probable investment, consider those that are currently in demand so you are rest assured of a profitable business.

If you are quite apprehensive about the latest market trend in real estate, it would be ideal to ask some advice from property managers within a given area. Ask what types of properties are in demand, and then weigh things up based on the law of supply and demand. It is essential to purchase something that is currently low in supply but highly in demand.

Other considerable factors are properties that have good access to shops, public transportation, or spacious parking lots, consider a property that has a flexible and functional floor plan. If you are planning to buy a property within the city’s vicinity, then consider the accessibility to schools, hospitals, and other essential community public facilities.

Your expenses like the strata fees must also be considered in buying a property investment since these can eat up a big chunk out from your profits. Let’s say, you purchased a small block-type property, fees could be around $650 or so per quarter.  This is way cheaper than a property block with a gym, swimming pool, and concierge, which will cost you a strata fee of around $1500 every quarter.

Apparently, expensive blocks will have higher rental charges, not everybody can afford such fees. And if the property is not generating a profitable income for a long period, it would be very hard to cover up the charges on your end.

Obviously, every property owner does not want high maintenance and operational expenses. It is therefore important that you try to visualise what would most likely happen with your investments during tight times. You have to understand the entire area of your preferred property. Just because one property is in demand on a certain area doesn’t necessarily mean that it can be extensive.

So don’t fall right away for properties with beautiful picket fences or a bedroom with its own personal bathroom – these amenities will not get the greatest yield. What really counts is purchasing a property at a good price, probable high income generating, and incurs reasonably low operating expenses.

If you are unsure on what action to take, seek some advice from your Rockingham Mortgage Brokers.