Renovating Tips

Home buyers wishing to extend finance in order to renovate their proprety have 2 basic options:

1. a second loan can be arranged for this OR
2. a new loan which consolidates the original mortgage and improvement funds.

Generally speaking consolidating the original mortgage is the preferred option unless the property is to be used for investment purposes in which case a second loan is a great idea to maximise your possible tax deductions.

When considering the cost of moving, including Government charges and selling costs, it often makes more sense to renovate and stay within the school zone and local community that suits your needs.

Renovating Tip:
Keep the cost of your renovations in proportion to your property's market value. If you spend too much, your home may be worth substantially more than the average for your area or “over-capitalised”, and if you sell your property you may not recover all your money. When property prices are stable or falling it’s easy to over capitalize.

First Home Owner Grant #2: How much is it?

The First Home Owner Grant (FHOG) in Victoria is actually made of several grants including:

1. Original FHOG;
2. New First Home Owner Boost
3. First Home Bonus
4. First Home Owner Regional Bonus

Total FHOG Payments:

From 1 January 2010 to 30 June 2010:

Established homes in Metro Victoria - total $9,000
Newly constructed homes in Metropolitan Victoria only - total $18,000
Newly constructed homes in Regional Victoria only -total $22,500

From 1 October 2009 to 31 December 2009:

Established homes in Metropolitan Victoria - total $12,500
Newly constructed homes in Metropolitan Victoria only - total $25,000
Newly constructed homes in Regional Victoria only - total $29,500

First Home Owner Grant #1: Am I eligible?

First Home Buyers Grant:

The First Home Owner Grant (FHOG) scheme was established to encourage and assist home ownership and to offset the effect of the GST on home ownership by providing a grant to first homeowners.

The basic criteria for eligibility for the FHOG are:

· Eligible applicants must be Australian citizens or permanent residents, who are buying or building their first home in Australia. Requirements vary between States to determine eligibility so for full information, check the Government website http://www.firsthome.gov.au/ for details

· Neither the applicant nor their spouse (or de facto) may have owned a home before - either jointly, separately or with some other person

· An eligible home must be located in Australia and will be a new or established house, home unit, flat or other type of self contained fixed dwelling that lawfully can be used as a residence

· An eligible home must be occupied by the applicant(s) as their principal place of residence within 12 months of settlement or completion of construction of the home. There are minimum periods of occupancy required by each State and Territory

· Application for the grant must be made within 12 months of completion of construction or settlement of the home

· Joint applicants will be restricted to a single application for a single property and only one payment will be made.

What costs are involved in buying a Property?

How much deposit do I need?
When buying a home, the size of your deposit makes a big difference - the more you've saved, the less you'll need to borrow and in turn the less the costs that you may have to pay.

Many lenders require at least 10% of the property purchase price as a deposit and to avoid having to pay Mortgage Insurance, borrowers usually need to have a deposit of 20%.

As we speak there are still a handful of Banks whom allow you to borrow 95% of the purchase price, meaning a 5% may be enough in some circumstances.

What are the Additional Costs I must budget for?
As well as your deposit, you will need to budget for some or all of the following costs:

· Government Fees including Stamp Duty on the property purchase plus Transfer and Registration of Title,

· Lenders fees which MAY include Mortgage Registration, Loan Establishment Fee, Settlement attendance fee, Mortgage Insurance, Rate Lock or Additional Security fee

· Legal fees/conveyancing, pre-purchase inspections including building or pest reports, rates and property taxes (adjusted at settlement), building and contents insurance

A very rough rule of thumb is that costs equal approx 5% of the purchase price, however we strongly suggest that you contact us on (03) 9827 9930 and we will provide you with a more accurate estimate of all costs.

Buying a Home? 4 good reasons to get Pre Approved

If you are in the market to purchase a property, we thoroughly recommend gaining Pre Approval from a bank for 4 good reasons:

1. Going through the pre-approval process is an important step in evaluating your financial situation. It gives you the opportunity to discuss with your broker the various loan products available and to address both the loan amount and repayments in terms of what you can comfortably afford.
Most importantly this process establishs a maximum purchase price which you can safely go up to when bidding on a house.

2. Knowing how much you can borrow means that you don’t waste time looking at the wrong properties. You will know exactly what price bracket to look in and thus avoid frustration and confusion.

3. It gives you the edge in a competitive market. If there is competition from other buyers for the property you have found, having your finance in place can put you ahead of the other buyers and improve your negotiating power. The vendor and the vendors agent will take you more seriously and give preference to you and your offer to buy the property.

4. Pre Approvals give you a safety net and feeling of security, yet are cost and obligation free. Hence there is no downside.

We can help you to get your pre-approval quickly and easily so please call Mortgage Monitors on (03) 9827 9930 with any queries.

Should I fix my home loan now?

Recently I have been inundated by clients, family and friends all wanting to know if now is the time to fix interest rates on their home loans.. in short, NO is our answer.

Whilst many are rightfully concerned about the likelihood of impending rate rises, unfortunately Australia's banks have foreseen this concern and have already increased fixed rates significantly in the hope of cashing in on the public's concern.

At the time of writing this post, Basic Variable Home Loans could be accessed at approx 5.60% pa. Now compare this to 3 year Fixed Rates with Australia's big 4 banks which are all between 7.50% and 7.80% pa, and you will see that rates need to rise 2% just to reach the current level of these fixed rates.

Therefore in order to save money over a 3 year fixed term, rates would need to rise to approx 9.50% in just 36 months.. and whilst rate rises are likely an increase of 4% is extremely unlikely.

Rather than fix your home loan, we instead recommend that you increase your loan repayments now.

Take advantage of the low interest rates now by making extra repayments, instead of paying banks off for being greedy by fixing your loan.

Want to discuss this in greater detail?
Please call me at Mortgage Monitors on (03) 9827 9930.