Finance advice
Blackburne Marina

It’s all in the planning when it comes to getting off-the-plan finance

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With at least 39 apartment developments currently under construction in the PerthPerth, TAS Perth, WA metropolitan area and more in the pipeline, it’s becoming more apparent that home owners and investors alike are seeking the apartment lifestyle for their next purchase.

It’s not unusual for a sizable percentage of those buyers to be scrambling at the last minute to get their finance approved or have to walk away due to not being able to obtain finance altogether, with an average fall over rate sitting at about 10% in this current market.

While there’s a degree of uncertainty in what anyone’s end position will be over the 18 months to two years a standard off-the-plan build takes, buyers must also go into a purchase being fully armed with what their own responsibilities are, from when they sign a contract to when it settles.

It’s imperative that a buyer is fully aware of what their borrowing capacity is and what it will be at settlement, factoring in a buffer for the possibility of potential rate rises. While lenders do load their rate for the purpose of servicing to factor in possible rate movements, there still is no guarantee that this benchmark will still be the same come settlement time, or that a buyer’s capacity to borrow will remain the same as when the contract was signed.

A good reminder of this was the major changes rolled out by APRA in the middle of 2015 restricting investment lending through across the board investment rate hikes. These changes impacted those investors leveraged most heavily, squeezing out many who were already close to their limit. This was a change nobody could foresee and was a game changer for some investors who could not afford for the goal posts to be moved.

Changes in a buyer’s personal circumstance is perhaps the most avoidable yet one of the most common reasons for a settlement to fall through. When making an off-the-plan purchase you are almost making a solemn vow to ensure that your current position at least remains the same if not improves during the period to settlement.

It can be the most arbitrary things that can be the most damaging. For instance, it is astonishing to know that many purchasers will take on significant additional personal debt such as car loans and credit cards without considering what impact this will have to their borrowing capacity. But it’s not only personal debt that can impact, self employed buyers acquiring more business debts can also come unstuck as a lender will factor in these liabilities also. Employment is a major factor, if not the most important factor, in getting a loan. A lender will take into consideration more than if you simply have an income or not, they want to see a stable history. The biggest deal breaker can be your employment status, particularly if you move from a PAYG job to becoming self employed. Most banks will need two year’s financials if you are self employed. One or two lenders may accept only one year’s financials, but they will also need to have the right policy for your individual circumstance.

Sometimes life does get in the way and there are certain changes that you don’t foresee, perhaps in the form of an unexpected child, a job loss or a relationship breakdown. In the unlikely event that a major life upheaval does present itself, then it’s crucial that a mortgage broker is engaged to fully assess what the likely outcome will be from a settlement perspective. Some fall overs can be prevented if purchasers choose to remain fully transparent with their broker and seller as the proverbial “ostrich burying his head in the sand” has never proven to be a successful strategy in mitigating a settlement falling over.

When buying off-the-plan its always recommended that an off-the-plan specialist broker is engaged right from the outset of the purchase, even before the contract has ever been put in front of a buyer. Being fully armed with the potential pitfalls in obtaining finance is crucial to ensure a successful settlement and buyers must also recognise their own responsibilities in making sure this happens.

If you are buying off-the-plan it pays to speak to an off-the-plan lending guru like the brokers at Blackburne Mortgage Broking and their second to none team. Contact us via the link or call +61 8 9429 5777 and ask to speak to Paul Prindiville, Team Leader.

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About the Blogger

Blackburne Mortgage Broking

Blackburne Mortgage Broking

Many brokers don’t understand how to correctly structure a property investment purchase, because they don’t work in property themselves. Blackburne Mortgage Broking specialises in property financing, and has the deep experience to help you minimise your costs.

Our brokers work with all the major lenders to find you the perfect loan at a very competitive rate. They’ve proactively helped people pay off their mortgage up to seven years faster, saving tens of thousands in interest.

Whether you’re buying a property off-the-plan or refinancing an existing property, we have the expertise to help you make an informed decision.

We live to hunt down the best loan, and we think long-term. We understand that you may not be best served by just the lowest interest rate, but also by flexibility further down the track.

Whether you’re a first homebuyer or a seasoned investor, Blackburne’s attentive, personalised service will give you absolute confidence.

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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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      • Interest only loans and if that is the way to go
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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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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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