First-home-buyers-seminar

Summer / Autumn 2009 Newsletter

OUR TEAM AT MORTGAGE CHOICE

Anthony Smith Mark Boulton Ph: 03 9585 7779 Ph: 03 9533 5340 Fax: 03 8610 0365 Fax: 03 8611 7915 Mob: 0413 439 761 Mob: 0403 047 147 anthony.smith@ mark.boulton@ mortgagechoice.com.au mortgagechoice.com.au

Property buying syndicates Jill O’Connor Chris Howitt Craig Micallef Ph: 03 9585 7779 Ph: 03 9333 4370 Ph: 03 9308 9163 Fax: 03 9333 4376 Fax: 03 9308 9257 Fax: 03 8610 0365 Mob: 0401 334 599 Mob: 0417 655 577 Mob: 0412 647 506 jill.oconnor@ craig.micallef@ chris.howitt@ mortgagechoice.com.au mortgagechoice.com.au mortgagechoice.com.au

Mitch Jones Stephen Forrester Shaun Curtis Ph: 03 9773 3438 Ph: 03 9773 3438 Ph: 03 9585 7779 Fax: 03 8610 0365 Fax: 03 8610 0365 Fax: 03 8610 0365 Mob: 0423 720 340 Mob: 0412 881 907 Mob: 0409 250 347 mitch.jones@ shaun.curtis@ stephen.forrester@ mortgagechoice.com.au mortgagechoice.com.au mortgagechoice.com.au

Mortgage Choice Limited 302 Charman Road CHELTENHAM VIC 3192 Phone 03 9585 7779 Fax 03 8610 0365 www.mortgagechoice.com.au/cheltenham1 This franchise is independently owned and operated by The Finassist Partnership ABN 51 426 348 068

Australians love a good challenge. And savvy property buyers are beating high property prices, by pooling their resources to make their dreams of property ownership a reality. With housing affordability an issue for many homebuyers, it may make good business sense for like-minded buyers to join forces to form what’s known as a property syndicate. Teaming up in this way boosts people’s collective buying power and allows them to invest in properties that may otherwise be out of reach. This approach to buying property could provide a foothold in property for people who may not otherwise be capable of achieving property ownership on their own. It’s one of myriad ways to enter the property market today. Property syndicates generally involve the purchase of commercial properties but they can also extend to residential

properties. A pool of investors in a syndicate shares the risks and rewards of the venture. Each investor in the syndicate has a share in the property proportionate to the size of their investment share in the rental income and capital proceeds when the asset(s) are sold. This type of investment in property can also be an affordable way of entering the property market – with the average investment minimum $10,000 – which could be, in some instances, less than it would cost to buy property yourself. There are different types of syndicates, such as those which are generally run for a set term (seven years on average) and operated by a fund manager whose responsibility is to source and develop the property portfolio. Once the term ends, the investors decide whether to wind up the syndicate, selling the asset/s or Continued on p2...

LENDERS GET RESPONSIBLE Credit problems that have emerged from the US highlight how poor lending practices can impact entire economies as well as being disastrous for families.

years, will impose heavy penalties on unscrupulous lenders as well as protecting consumers from deceptive advertising or being sold loans they cannot afford to repay.

In a bid to prevent Australian borrowers being coerced into debts they cannot afford, the Rudd government plans to introduce a ‘responsible lending test’ to the Consumer Credit Code this year.

Details of the new lending test are yet to be ironed out. However as a first step, mortgages on investment properties will be covered by the Credit Code, which formerly only included residential home loans. This is designed to prevent property spruikers encouraging ‘mum and dad’ investors from taking on excessive levels of debt.

The $71 million scheme to be implemented over several

INSIDE • Buy before you sell? • Credit History • Boost to First Home Owner Grant • Debt hangover?

...continued from p1 rolling over the syndicate for a further term. There is another kind of fund that, rather than running for a set period, is managed in such a way that properties are bought, sold, and added over time. These are quite popular among people who like being associated with a fund that has a property portfolio which expands over time. Along with having benefits, like any major financial decision being undertaken, joining a syndicate is a major financial decision that should not be entered into lightly - and of course there are pros and cons associated with it to be aware of and the risks are many and varied. For example, you will need to look closely at the types of tenants being chosen for your properties which could also impact on your investment. Ultimately, you need to consider what level of risk you feel comfortable with. Are you willing to tackle these and other factors relating to your investment? Or, your syndicate may include an older property that requires a high level of maintenance: you must factor in how the expenditure could impact upon the return on the investment. Problems could arise when there are multiple owners of a property, especially when one owner chooses to sell up down the track. Be thorough with your research when deciding whether a syndicate is suitable for you and whether you have confidence in the abilities of the people you are investing with. The ways to obtain your foothold in property are many and varied – and a property syndicate is just one way of doing so. You may also want to consider buying property with a family member or a friend, which is emerging as one of the more popular ways of securing home ownership. If you are thinking of taking the steps towards property ownership, talk to Mortgage Choice, the home loan specialists, who can find a suitable loan that meets with your personal and financial requirements. Mortgage Choice has a comprehensive range of lending institutions on its lending panel and Mortgage Choice loan consultants do not charge you for their services – so you can be assured they are working with your interests in mind!

Should you buy before you sell your property For many people, the home you own today may not be the one that will suit your needs tomorrow. So do you sell your current home before you buy a new one, or take the leap and buy the new one first?

According to Dave Dorian, the co-founder and head strategy coach for The Next Property Millionaire, it makes sense to purchase the new property first if you already own your home outright or have only a small mortgage. “This would give the purchaser the opportunity to properly look around and do adequate research, and they can use the equity in the existing home as leverage to get finance,” Dorian says. The situation changes however if you already have a substantial mortgage, with

buyers often getting into trouble managing two mortgages. Dorian says it is important that you get loan approval for the new purchase before doing anything. One option is to take out a bridging loan, which enables you to buy a new property while you wait for the sale of your existing property. Many of these loans are offered at standard home-loan interest rates and do not require you to pay down the capital amount. However, these loans also carry higher fees, and it is important to understand how much you will be paying, especially if it should take longer than expected to sell your existing property. Some bridging loans are only available for short periods, and you will still be paying two loans until the existing property is sold. Of course, you can always sell your existing home before you find a new one. Apart from needing to find somewhere to live in the interim, if prices are rising, you will miss out on any potential appreciation in the price of your existing property. Of course, if prices are falling you may be better to sell now and buy later.

Keep your credit history in great shape! When you’re in the market for a home loan, a healthy credit record is a great asset, and a few simple steps are all it takes to keep your credit history looking good. Whenever we apply for credit, lenders take a look at our credit file to see how well we’ve managed debt in the past. Credit files, maintained by credit bureaus like Veda Advantage and Dun & Bradstreet, show details of previous loan applications plus any defaults (overdue payments) for a period of up to five years. This information gives lenders a sense of your credit worthiness, so it’s worthwhile casting an eye over your credit file before applying for a loan. You can log onto www.mycreditfile.com.au for a free copy of your credit record from Veda Advantage. Keeping your credit history in good shape is as simple as paying bills on time and maintaining regular repayments on any current loans. Paying any overdue accounts can clean up a tarnished file, and while these may still appear on your record for up to five years, it shows lenders you’re serious about maintaining a healthy credit reputation.

Boost to the First Home Owner Grant The recent turmoil on world financial markets has delivered an unexpected silver lining for Australians seeking to purchase their first property. In October 2008 the Federal Government announced it was doubling the amount of its First Home Owner Grant to $14,000 for people buying their first home, and trebling it to $21,000 should they be building their first home or purchasing a newly-built property. The First Home Owner Boost applies to properties purchased between 14th October 2008 and 30th June 2009, and can make a significant difference to the affordability of a home. For instance, a person who has saved a deposit of $50,000 will now have $64,000 to spend, or $71,000 if they are buying a newly built property.

Also, at least one applicant must reside in the home for at least six months within the first year of taking ownership. The grant is also not available to companies or trusts, and is only available to people over the age of 18. At least one applicant must be an Australian citizen, and the applicant or their spouse/defacto must also have never previously received a First Home Owner Grant. In the case of a newly constructed home, the full amount of $21,000 is only available when the sale is the first actual sale of that house or unit. It must also have never been occupied as a place of residence, by the builder, a tenant or any other occupant. Some substantially renovated homes may qualify,

where all (or substantially all) of it has been removed or replaced. But the same criteria as for a newly constructed home apply. It is also worth remembering that for a newly constructed home, the prospective purchaser must enter into a contract with the builder before June 30, 2009. The property does not need to be completed by that date, although construction must start within 26 weeks of signing and the contract must specify a date for completion within 18 months. Off-the-plan properties must carry a specified date for completion before December 31, 2010, so it is wise to have the relevant approvals from planning authorities. Applying for the Boost requires filling out the standard First Home Owner Grant application, although applicants also need to complete an addendum if they wish to claim the additional $7,000 new Congratulations to the winner of the property grant.

Got a post silly season debt hangover? Did you rack up a whopping credit card bill after splurging on Christmas gifts and post-Christmas sales? Searching for ways to manage your debts or keen to find a cheaper home loan? You may want to consider refinancing. Refinancing enables you to reassess your home loan, or loans, and compare them with others available, in order to repay them with a more suitable loan – usually one with a lower interest rate, or fewer fees, for instance. Before you decide to refinance, consider whether it is advantageous in doing so. Will you need to pay loan exit fees or loan

switching fees? Weigh up whether extending a short term debt over a longer period is suitable for you. If you find that your personal financial situation has changed and you simply want to compare your current repayments, loan facilities and options with those of other suitable products, contact your local Mortgage Choice loan consultant.

WINNER

Although the grant is not means tested and there is currently no limit to the price of the home, you will need to check that you are eligible to receive it. As the grant is intended for new home owners, no one involved in the purchase can have previously owned all or part of a residential property anywhere in Australia before 1 July 2000, nor can the applicants have occupied a residential property in which they owned a part or full stake for a continuous period of six months since that date.

Winter/Spring 2008 Escape on your dream holiday competition.

Mr Michael Tang from South Hurstville has won $6,000 to spend at Flight Centre.

Mortgage Choice Limited 302 Charman Road CHELTENHAM VIC 3192 Phone 03 9585 7779 Fax 03 8610 0365 www.mortgagechoice.com.au/cheltenham1 This franchise is independently owned and operated by The Finassist Partnership ABN 51 426 348 068

ESCAPE ON YOUR DREAM HOLIDAY

with $6,000 to spend at Flight Centre

Simply call 1300 302 668 to make an appointment with one of our loan consultants and request to be entered into the draw.

Congratulations Mortgage Choice would like to congratulate Nicholas Bradley-Qalilawa from the Manly Sea Eagles who has been announced as the winner of the inaugural ‘Mortgage Choice / Imminent Wealth Academy Entrepreneurial Player of the Year Award 2008 supported by the RLPA’. He is a partner in fashion company ‘Daniel Avakian’, which designs, produces and manufactures high quality garments for women. One of the judges, Paul Lahiff, Managing Director of Mortgage Choice, said, “We are proud to contribute to the business education and support of a worthy up and coming entrepreneur.”

At Mortgage Choice we make getting started simple, from finding a home loan that suits you, to taking you through the whole application process. Whether you are buying a new home, refinancing, consolidating debt, investing in property or financing a renovation, talk to the specialists. Mortgage Choice offers: • Wide choice: We have many of Australia’s leading banks and lenders on our panel who offer collectively hundreds of home loan products • Professional home loan advice • Local knowledge: We’re Australia’s leading mortgage broker because we combine local knowledge with over 15 years experience

Call now on 1300 302 668 or fill in your contact details below and • Fax it to: (02) 9954 4913 or • Mail it to: Mortgage Choice Escape On Your Dream Holiday Promotion, Reply Paid 74789, North Sydney NSW 2060 NAME

STREET

SUBURB

EMAIL

POSTCODE

CONTACT NUMBER

ESCAPE ON YOUR DREAM HOLIDAY PROMOTION: Call 13 MORTGAGE to make an appointment with a Mortgage Choice consultant and once you’ve attended that appointment you’ll automatically go in the draw to win $6,000 deposited into a Flight Centre account in your name. There will be 1 draw and the first valid entry will win. The opening day of the competition is 4th February 2009. All entries must be received by Mortgage Choice at the address above by 12pm EST on 6th May 2009. The draw will be held at 4pm EST on 7th May 2009 at the offices of Mortgage Choice. The name of the winner will be published in the Australian on 14th May 2009. Complete terms and conditions and the privacy notice are available from www.mortgagechoice.com.au. The promoter is Mortgage Choice Limited at Level 10, 100 Pacific Highway, North Sydney NSW 2060. Authorised under NSW Permit No. [LTPS/08/10858], ACT Permit No. [TP 08/04517], VIC Permit No. [08/5098], and S.A. Permit No. [T08/4388].

STATE OF THE MARKET During the September quarter 2008 the median house price for Melbourne decreased by 3.3% to $435,000, while the median price for other dwellings decreased by 0.4% to $369,000. The moderate drop in house values is a direct result of the most difficult external economic climate we have witnessed for many years. It has been a positive counterbalance for the market to have received a substantial cut in the interest rate and increased financial assistance for first home buyers, however the impact won’t be apparent till the December quarter 2008. Melbourne is also still experiencing increases in population and has a very tight rental market. Overall the local housing market is the most volatile it has been for many years. In the March quarter the median price fell, in the June quarter it increased and now in the September quarter it has fallen. Auction clearance rates have varied by over 10 per cent in a single month. The situation didn’t fare much better in regional Victoria where median house prices decreased in Bendigo and Geelong over the quarter, although there was a slight increase in the median house price in Ballarat. Written by Real Estate Institute of Australia for Mortgage Choice

Privacy: There will be occasions where we would like to send you valuable information directly related to property finance, as well as other related offers, tips and opportunities. However should you wish to receive only certain types of information or nothing at all, please contact your local franchise principal. Disclaimer: The content of this newsletter is written expressly for education purposes and is based on the opinions of the authors. The authors and agents for the authors are unable to accept any liability or responsibility whatsoever to any error or omission or any loss or damage of any kind sustained by a person or entity arising from the use of this information. It is recommended that you seek professional advice relevant to your specific circumstances before acting on the information based in this document.