Finance advice

Structuring the right loan in 2013

By Harry Bozin

blogimageAs we begin 2013, it is my feeling that we are going to see some interesting developments in the Australian residential property and mortgage markets over the next 12 months.

Blogger: Harry Bozin, Century 21 Home Loans WA

2012 was a year marked by economic uncertainty and soft consumer sentiment, which arguably dampened transaction activity and kept dwelling prices relatively flat, despite four interest rate cuts by the Reserve Bank.

Nevertheless, most analysts have flagged 2013 as a year for moderate improvement within the housing market and there are early signs that this view may be correct, with the Australian Bureau of Statistics (ABS) recently reporting spikes in dwelling commitments and building approvals.
Figures such as these will likely send a positive sign to prospective homebuyers and investors, many of whom may have intentionally stayed on the sidelines in 2012. In fact, some buyers may look to enter the market sooner rather than later, while interest rates remain low and housing prices appear stable.

For these buyers, a central consideration is going to be how to structure the right home loan. A number of important factors go into making this decision – however, what borrowers most commonly question is whether to fix, float or split their home loan between fixed and variable.

So how can a borrower best approach this decision in 2013?

As a borrower, the key is to always review your individual circumstances and weigh up the advantages and disadvantages. The worst thing you can do is to lock in a home loan that doesn’t properly account for your current and future circumstances.

In particular, if you are considering fixing a rate, you need to think about how long you intend to hold on to the property in question. Fixing a rate usually means that you are going to stay in a property for a longer period of time. If you’re a property flipper – however, who sells every 12 months, then a fixed rate product may not be the most suitable for your needs.  

If you choose to go with a fixed loan product, your repayments won't change during the period you have selected. For example, if you’ve selected a five-year fixed rate mortgage, your repayments won't rise or fall with any interest rate fluctuations during that five year period.

Alternatively, a variable rate loan product may suit your needs if you’re a long-term borrower. In these instances, once the fixed loan period comes to an end, you have the option for another fixed rate period or to switch to a variable loan product with a split facility, depending on your needs.

Most fixed rate home loans also limit your ability to make any extra repayments – something which variable rate loans allow. In the case of a fixed rate loan, if your circumstances unexpectedly change, and you require early repayment of your loan, you could very well be faced with some hefty early exit fees.

Understandably, many would-be purchasers will wait for the possibility of further rate cuts in the hope of securing the lowest fixed-rate home loan package. Attempting to guess interest rate movements is, however, a difficult business and even our top economists sometimes get it wrong.
Ultimately, if you watch the market closely and believe that rates are likely going to increase then you should certainly consider locking in a fixed rate loan. However, just remember that if rates do drop further (as some have predicted), you will be unable to take advantage of these reductions.

Given that interest rates are so low, and there is talk of them falling further, fixing your current mortgage over three to five years will require some serious consideration. However, it would be wise to consider locking your mortgage in for over 12 months with a portion fixed and a portion variable; this would enable you to maximise the benefit should there be a downward movement in rates.

At the end of the day, nobody can guarantee you what loan facility will save you the most money in the long-term; there are simply too many unpredictable and uncontrollable factors that will bear on this outcome. What you can do – however, is properly research the market and aim to make an informed and considered decision. A mortgage broker can be an invaluable resource in this respect, as they can provide you with a range of options and guidance to help you select the best product and associated rate for your personal situation.

 


 About Harry Bozin

blogimage2Harry Bozin is the director at Century 21 Home Loans WA.

AFG Excellence Award Finalist 2010/2011


Australian Mortgage Awards (AMAs) - Franchise Brokerage of the Year 2010


AFG Excellence Awards Finalist 2011/2012

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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  ["introtext"]=>
  string(255) "

Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

    \r\n
  • The pitfalls that he has seen people get into<\/li>\r\n
  • Interest only loans and if that is the way to go<\/li>\r\n
  • How the mortgage division supports the overall business of Rethink Investing<\/li>\r\n<\/ul>","clientImage1":"images\/podcasts\/Son-Pham.jpg","clientUrl1":"https:\/\/rethinkinvesting.com.au\/","clientName2":"OpenCorp","clientDesc2":"

    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
    • How he wants to help clients take advantage of the current market<\/li>\r\n
    • Why negative press can be good for investors<\/li>\r\n<\/ul>","clientImage2":"images\/podcasts\/Michael-Beresford-170x170.jpg","clientUrl2":"https:\/\/www.opencorp.com.au\/","clientName3":"","clientDesc3":"","clientImage3":"","clientUrl3":"","clientName4":"","clientDesc4":"","clientImage4":"","clientUrl4":"","author_promotion_line":""}" ["metadata"]=> string(53) "{"robots":"","author":"","rights":"","xreference":""}" ["metakey"]=> string(60) "mortgages, tighter, lending, economy, brisbane, good, option" ["metadesc"]=> string(200) "Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall" ["access"]=> string(1) "1" ["hits"]=> string(2) "31" ["xreference"]=> string(0) "" ["featured"]=> string(1) "0" ["language"]=> string(1) "*" ["readmore"]=> string(3) "818" ["ordering"]=> string(1) "0" ["category_title"]=> string(17) "Property Showcase" ["category_route"]=> string(25) "podcast/property-showcase" ["category_access"]=> string(1) "1" ["category_alias"]=> string(17) "property-showcase" ["published"]=> string(1) "1" ["parents_published"]=> string(1) "1" ["lft"]=> string(2) "98" ["author"]=> string(12) "Todd Stevens" ["author_email"]=> string(33) "[email protected]" ["parent_title"]=> string(7) "Podcast" ["parent_id"]=> string(2) "48" ["parent_route"]=> string(7) "podcast" ["parent_alias"]=> string(7) "podcast" ["rating"]=> string(1) "0" ["rating_count"]=> string(1) "0" ["alternative_readmore"]=> NULL ["layout"]=> NULL ["params"]=> object(Joomla\Registry\Registry)#1215 (3) { ["data":protected]=> object(stdClass)#1212 (95) { ["article_layout"]=> string(14) "spbase:article" ["show_title"]=> string(1) "1" ["link_titles"]=> string(1) "1" ["show_intro"]=> string(1) "1" ["info_block_position"]=> string(1) "0" ["info_block_show_title"]=> string(1) "1" ["show_category"]=> string(1) "1" ["link_category"]=> string(1) "0" ["show_parent_category"]=> string(1) "0" ["link_parent_category"]=> string(1) "0" ["show_associations"]=> string(1) "0" ["flags"]=> string(1) "1" ["show_author"]=> string(1) "1" ["link_author"]=> string(1) "0" ["show_create_date"]=> string(1) "1" ["show_modify_date"]=> string(1) "1" ["show_publish_date"]=> string(1) "1" ["show_item_navigation"]=> string(1) "0" ["show_vote"]=> string(1) "0" ["show_readmore"]=> string(1) "1" ["show_readmore_title"]=> string(1) "0" ["readmore_limit"]=> string(3) "100" ["show_tags"]=> string(1) "1" ["show_icons"]=> string(1) "0" ["show_print_icon"]=> string(1) "0" ["show_email_icon"]=> string(1) "1" ["show_hits"]=> string(1) "0" ["show_noauth"]=> string(1) "0" ["urls_position"]=> string(1) "0" ["captcha"]=> string(0) "" ["show_publishing_options"]=> string(1) "1" ["show_article_options"]=> string(1) "1" ["save_history"]=> string(1) "0" ["history_limit"]=> int(10) ["show_urls_images_frontend"]=> string(1) "0" ["show_urls_images_backend"]=> string(1) "1" ["targeta"]=> int(0) ["targetb"]=> int(0) ["targetc"]=> int(0) ["float_intro"]=> string(5) "right" ["float_fulltext"]=> string(5) "right" ["category_layout"]=> string(6) "_:blog" ["show_category_heading_title_text"]=> string(1) "0" ["show_category_title"]=> string(1) "0" ["show_description"]=> string(1) "0" ["show_description_image"]=> string(1) "0" ["maxLevel"]=> string(1) "0" ["show_empty_categories"]=> string(1) "0" ["show_no_articles"]=> string(1) "1" ["show_subcat_desc"]=> string(1) "0" ["show_cat_num_articles"]=> string(1) "0" ["show_cat_tags"]=> string(1) "0" ["show_base_description"]=> string(1) "1" ["maxLevelcat"]=> string(2) "-1" ["show_empty_categories_cat"]=> string(1) "0" ["show_subcat_desc_cat"]=> string(1) "1" ["show_cat_num_articles_cat"]=> string(1) "1" ["num_leading_articles"]=> string(2) "15" ["num_intro_articles"]=> string(1) "0" ["num_columns"]=> string(1) "0" ["num_links"]=> string(1) "0" ["multi_column_order"]=> string(1) "0" ["show_subcategory_content"]=> string(1) "0" ["show_pagination_limit"]=> string(1) "1" ["filter_field"]=> string(4) "hide" ["show_headings"]=> string(1) "1" ["list_show_date"]=> string(1) "0" ["date_format"]=> string(0) "" ["list_show_hits"]=> string(1) "0" ["list_show_author"]=> string(1) "0" ["list_show_votes"]=> string(1) "0" ["list_show_ratings"]=> string(1) "0" ["orderby_pri"]=> string(4) "none" ["orderby_sec"]=> string(5) "rdate" ["order_date"]=> string(9) "published" ["show_pagination"]=> string(1) "2" ["show_pagination_results"]=> string(1) "1" ["show_featured"]=> string(4) "show" ["show_feed_link"]=> string(1) "1" ["feed_summary"]=> string(1) "0" ["feed_show_readmore"]=> string(1) "0" ["sef_advanced"]=> int(0) ["sef_ids"]=> int(0) ["custom_fields_enable"]=> string(1) "1" ["show_page_heading"]=> string(1) "0" ["layout_type"]=> string(4) "blog" ["menu_text"]=> int(1) ["menu_show"]=> int(1) ["page_title"]=> string(53) "Finance Tips and Insights - Smart Property Investment" ["menu-meta_description"]=> string(91) "Financial tips for property investors, from mortgages to cash flow to saving for a deposit." 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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1213 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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