Finance advice
Rolf Howard

Be wary of the banks

By Rolf Howard

The banks are once again actively courting potential home buyers with offers of very attractive low deposit loan packages. Almost three-quarters of home loan products now require just a 5 per cent deposit or less to secure them. 

Blogger: Rolf Howard, CEO, Owen Hodge Lawyers

We are warning its customers, particularly first home buyers, to do their ‘homework’ before investing in a property to ensure they do not become a bank repossession statistic.

Low interest rate environments generally draw out risky investment opportunities. People are seeking to make a quick profit and often jump into investment opportunities that, at first glance look good, however careful due diligence often reveals a potentially venomous sting in the detail.

The banks have recognised that borrowers are on the move again and in very high numbers.  Consequently they have started lowering their lending requirements, sometimes to the eventual detriment of unwary customers. The property market, particularly in Sydney, is performing very strongly.

Auction clearance rates are at all-time highs and people are paying well above the reserve price in many cases to secure property.

Like any good investment opportunity, thorough research is the key to ensuring the longer term viability of an investment. First home buyers are securing a significant number of the new loans at the present time to capitalise on the low interest rate environment, however in some cases they are not thoroughly reviewing their borrowing capacity in the event of a change in circumstances such as an income downgrade, job loss or unexpected pregnancy.

A heated property market is a time for great caution, especially when banks are introducing potentially risky home loan products. The current high liquidity environment translates into a greater availability of cash. The outlook is very good for property, particularly in Sydney.  However this inviting investment context must be kept in perspective by property buyers.  This is achieved by ensuring the underpinning financial homework is undertaken with great prudence.

Purchasing property is a great way to enhance financial status. The right time for individuals to do this is always determined by exercising considered due diligence. Stability in personal circumstances such as employment security is a very important consideration prior to obtaining a loan to ensure long term repayment capacity.

The reality is that banks are constantly driven by the need to enhance the quantum of shareholder dividends.  To balance this equation third party providers, such as mortgage brokers, align with borrowers to assist them navigate the maze of financial mortgage products thereby helping to eliminate the risk of choosing a path that could be detrimental to an individual’s longer term financial interests.

Five tips for those about to take out a loan include:
1)    Be realistic about your borrowing capacity. Living on bread and butter to ensure mortgage repayment is neither enviable nor sustainable. Borrow within your means.

2)    Purchasing a property is generally a long term strategy.  Your thinking needs to reflect this.

3)    Shop around and review the various bank products to find one that is right for your situation. Know the criteria required. The cheapest loan is not always the best. Flexibility is the key when considering mortgage products.

4)    Research both the property and loan criteria very carefully to ensure both are the best for your circumstances. Be prepared to pay for a bank evaluation prior to purchasing any property to ensure the amount being paid is appropriate.

5)    Surround yourself with a good team including a financial planner, mortgage broker to educate and guide you through the process, a conveyancer and an accountant who understands property.

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About the Blogger

Rolf Howard

Rolf Howard

Rolf is Managing Partner of Owen Hodge Lawyers. He has been in the legal practice since 1986 and a partner of Owen Hodge Lawyers since 1992. Rolf focuses on assisting clients to proactively manage legal responsibilities and opportunities to achieve competitive advantage.

Rolf concentrates on business planning and formation, directors’ duties, corporate governance, fund raising and business succession. His major interest is to assist business owners and their financial advisers plan and implement strategies to build and exit from successful businesses.

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

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  • The pitfalls that he has seen people get into<\/li>\r\n
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    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
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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)#1202 (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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