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Archives for Mark Buisman

Purchasing Your First Home

Buying a house can be a daunting, complex and often frustrating experience – and that’s for people who’ve done it before! A first home buyer can often feel completely overwhelmed when faced with their first property purchase.

If you’re about to buy your first home, you may feel like you’re on the brink of taking a great leap into the unknown. The idea of lenders, real estate agents, solicitors and vendors all with mountains of forms, requirements and jargon may have you wondering whether it’s worth all the effort. And on top of all that, you still have to find the right house!

Relax – it’s not that bad.

Save time and money by avoiding these common first home buyer mistakes

1. Underestimating the costs of purchasing property

Some first home buyers make the mistake of thinking that if they’ve got a $50,000 deposit and a $500,000 home loan approval, they will be able to afford a $550,000 property. The truth is that there are many other costs involved, other than the price of the home. Inspection reports, Lenders Mortgage Insurance (LMI), solicitors’ costs, and stamp duty are just a few of the additional costs involved in purchasing your first a home.

2. Over-extending

Buying your first home should be a happy experience, not one that leaves you racked with doubts and resentment. Far too many first home buyers find themselves in difficult situations because they didn’t stick to their budget, or they didn’t create a budget that was realistic for their needs. The best way to avoid overextending is to have a firm grasp on your current income and expenses. If you know exactly where all your money goes each month, before you buy, you will be much better able to plan an affordable repayment strategy. When it comes time to make an offer, never go above your budgeted purchase price. You never know what might happen in the future that will put strain on your finances.

3. Not taking advantage of first home owner concessions

The First Home Owner Grant is a government initiative to assist people in buying their first home in Australia and can save you thousands in duties and fees. Visit the First Home Owner Grant website for details on each state’s grants.

4. Not considering all aspects of a property

It can be hard not to let emotions get involved when inspecting a property. People immediately start thinking about how they’re going to remodel the bathroom or how they might arrange their furniture. The tendency to get too far ahead and caught up with the aesthetics of a property often distracts people from considering other essential points. Think beyond the home. What is the local council like and how do their services measure up? How has the suburb been trending in the past few years? How is the home positioned and what are the neighbours like? Are there many owner-occupiers around you? Is there adequate public transport? Are there infrastructure or building development plans near the property?

5. Failing to get a property inspection

A building inspection is a worthwhile investment for a number of reasons. Aside from their ability to bring potential problems to light, building and pest inspections can also be used to negotiate on the purchase price. We’ve all heard horror stories of buyers discovering structural faults, water or pest damage after spending their whole budget on purchasing the home. If you can get a third party to identify any issues before you purchase, you will have much more bargaining power with the seller.

Good luck with the house hunting and look forward to the memories that you will create in your new home. If you would like to talk to one of our mortgage brokers contact us today.  One of our friendly advisers would be delighted to speak with you about your property investments.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

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10 Tips for Buying an Investment Property

Buying an investment property continues to be one of Australia’s favourite ways to invest. An investment property should be about increasing your wealth and securing your financial future, which is something our mortgage broking team can help you with.

Here are 10 tips to assist in purchasing an investment property:

1. Choosing the right property at the right price

Investing in real estate is usually all about capital growth, so choosing a property that is more likely to increase in value is the most important decision you will make, therefore buying at the right price is absolutely critical.

The key is to do your research, work out what properties are selling for in and around the area and you’ll soon discover you’ll become very good at working out a property’s worth. Never consider purchasing real estate in an area you are unfamiliar with.

You probably aren’t aware but lenders and mortgage insurers have valuable data on different locations and property developments, you should try and access this information to assist in avoiding the wrong investment property.  Whatever you do, never make a decision to buy an investment property based on a tax deduction – always focus on making the right investment choice.

Ensuring you have a steady rental income stream is also vital.  This cash flow will make the holding of the property more affordable and provide a reliable income.

Different classes of residential property – home units, houses and land – can outperform each other over time.  For example, vacant land will provide no rental income but may appreciate more quickly if purchased in an area with limited supply.  Investing in a home unit might mean less maintenance costs than investing in a freestanding weatherboard house.  You may also find, some areas offer higher rental yields, but it is important to do your homework as often these properties provide lower capital growth opportunities.

2. Crunch the numbers

Investing in property is a proven path to long-term wealth, however you should consider it a medium to longer term type of investment.  You’ll want to make sure you can afford to maintain your mortgage repayments over the long term.  You will not want to have to sell your investment property until you are good and ready and if you were to encounter some financial stress, this could force you to offload the property at the wrong time.

Once you own an investment property it can be quite inexpensive to keep and service the loan.  This is because you should be earning rent and claiming tax deductions on the expenses associated with owning the property.  Remember, rent payments tend to increase as does your own income – so expect things to get easier over time.

You probably aren’t aware but lenders and mortgage insurers have valuable data on different locations and property developments and you should try and access this information to assist you to avoid picking the wrong investment property.

Whatever you do make yourself aware of taxes involved in property investing and add these into your calculations.  Advice from your accountant is vital in this regard as these can change.  Stamp Duty, Capital Gains Tax and Land Tax all need to be taken into account.  Remember that interest rates can vary over time but the good news for property investors is that in times of rising interest rates you can normally expect to be able to increase the rent.

You should also know that banks only take 80% of the rental income into account when working out whether you can afford an investment loan.  This is due to costs like letting fees and vacancy rates, consider using this as a rule of thumb for you too.  If you need help working out the cost of holding an investment property you can contact us.

3. Find a good Real Estate Property Manager and let them do their job

A property manager is usually a licenced real estate agent that is a professional in their field, and their job is to keep things in order for you and your tenant.  They can help you with ongoing advice, help you manage your tenants and get you the best possible value from your property.  A good agent will let you know when you should review rents and when you shouldn’t.

The property manager should be able to give you advice on property law, your rights and responsibilities as a landlord – as well as those of the tenant.  They’ll also take care of any maintenance issues, although you should approve all incurred costs (other than certain emergency repairs), in advance.

The property manager will also help you find the right tenant, conduct reference checks and make sure they pay their rent on time.  It is important that you don’t interfere too much with tenants because there are laws that give them rights, so always try to respect them.  You should, however, make regular independent inspections of your property to make sure that the tenant is looking after your investment but always go through your agent and give plenty of notice.

The good news is that the cost you pay to your managing agent is usually a percentage of the rent paid this is deducted from the rent you receive and is tax deductible.

4. Understand the Market and the dynamics of where you are buying

Consider what other properties are available in the immediate area and speak to as many locals and real estate agents as you can.  They may let you know if one side of a street is considered superior to the other.  Make sure you do the legwork and consult professionals you can trust.

It is also a good idea to find out what changes may be happening in your suburb and the local council can often help here.  For example, a major construction next to your property could make it harder to find a tenant at the right price or a planned by-pass may mean traffic will be reduced and this may increase the value of your property quicker than expected.

5. Pick the right type of Mortgage to suit you

There are many options when it comes to financing your investment property, so get sound advice in this area as it can make a big difference to your financial well-being.

Interest on an investment property loan is generally tax deductible, but some borrowing costs are not immediately deductible and knowing the difference can make a big difference.  Structuring your loan correctly is critical and this should be done with the help of a trusted financial adviser.  It is recommended to avoid mixing up investment property loans with your home loan. Each loan needs to be separate so you can maximise your ongoing taxation benefits and reduce your accounting costs.

Whether you choose a fixed rate loan or a variable rate loan will depend on your circumstances, but consider both options carefully before you decide.  Over time variable rates have proven to be cheaper, but selecting a fixed rate loan at the right time can really pay off.  Remember that rates usually rise in line with property prices, so increasing interest rates are not always bad news for property investors as they have more than likely had a win on the capital gains front.

Most investment loans should be set up as Interest Only (rather than Principal and Interest) as this increases the tax effectiveness of your investment, particularly if you have a home loan.  You may also want to seriously consider an investment loan that gives you the opportunity of paying interest in advance, a redraw facility or an Offset Account

6. Use the equity from another property

Leveraging equity in your home, or equity from another property investment, can be an effective way to buy an investment property.  Equity is the amount of money in your home that you actually own.  It can be calculated by working out the difference between what your property is worth and what you owe on the mortgage.  Utilising the existing equity within your home can allow you to borrow more money against your investment property purchase, which will increase your tax deductions.

7. Negative Gearing

Negative gearing can offer property investors certain tax benefits if the cost of the investments exceeds income it produces.  Australian law allows you to deduct your borrowing and maintenance costs for a property from your total income.  However, you can only get a tax benefit if you earn other taxable income in the first place.  So, while you are actually making a loss on the property, the advantage is that the loss can be used to reduce the amount of tax on your other earnings.  However, as stated earlier, do not buy an investment property just to get a tax deduction.

8. Check the age and condition of the property and facilities

Even with negative gearing, needing to replace the roof or hot water service in the first few months of ownership could make a significant difference to your profits and really damage your cash flow.

It is therefore advisable to engage a professional building inspector before you purchase to conduct a thorough inspection of the property to find any potential problems.

It is also wise to use a qualified tradesperson who is licensed to carry out the work and who has adequate insurance to protect you against poor workmanship.

It’s not always a bad thing to buy a property that is not in peak condition because you get the opportunity to improve the value of the property by renovating and this can increase your returns for both capital growth and rental income.

9. Make the property attractive to renters

Go for neutral tones and keep the kitchen and bathroom in good condition.  Kitchens and bathrooms often make a property more saleable.  You’ll find that you will attract better quality tenants if you have a well-presented property.  The last thing you want is a bad tenant.

10. Take a Long-Term view and manage your risks

Remember that property is a long-term investment and you should not rely on property prices rising straight away.  The longer you can afford to commit to a property the better As you build up equity you can then consider purchasing a second investment property.

Finally, it is also paramount that your personal risk insurance cover is reviewed to ensure that if anything unforeseen was to occur that you and your family will be adequately covered.

If you have any questions or would like to learn more about investing in property, please contact our mortgage broking team today.

Please note the information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. Before acting on anything in this article you should consider its appropriateness to you, having regard to your objectives, financial situation and needs.

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Selling Your Home This Spring

There’s a commonly held belief in the real estate industry that spring is the best time of the year for selling a home. Although the season doesn’t officially start until September 1, now would be the time to start planning to make sure your property stands out from the rest.

Every aspect of the season can work in a seller’s favour. With the sun shining, the flowers in bloom, this not only makes your home look its best, but it also encourages buyers to get out and attend open inspections. It is important to remember that other sellers will also benefit from these conditions. Selling your home in spring means you’ll be faced with a higher degree of local competition than you would during the winter months. If you’re thinking of selling your home this spring, a good local real estate agent can help you increase the sale price.

To help make your property stand out from the competition, you’ll need to put in a bit of extra effort. One of the first areas to address is your property’s exterior appearance, because this is the first thing that buyers will see. You will want to put some effort into improving your kerb appeal. Take good care of your lawn by tidying your yard with a lawnmower, fixing dead or bald patches in the grass with a bit of fertiliser. Pull weeds and plant new flowers to add vibrant touches of colour to the garden. Flowers like daffodils and tulips are a good choice, because yellow is associated with feelings of optimism and happiness.

At the same time, be sure that the street view of your home is clear for viewers. Clear away any large bushes or trees that are in the way of a buyer’s line of vision by trimming stray branches. You may want to hire a professional gardener who has experience pruning trees for larger jobs, because this can be dangerous to do on your own.

Maximising the External Appeal

Although it is easy to overlook exterior areas like the outdoor nooks and crannies of the property, buyers will look everywhere. They can trek a great deal of muck throughout the property in winter, so you’ll need to give the full exterior of the home a good spring clean to make the best first impression. If you neglect these areas of the house, buyers may assume that you have neglected others.

Maximising the Interior Appeal

With the outdoor area of your home looking fresh and well-maintained, you can turn your attention to the interior of the home. Make the most of the spring sunlight by ensuring that it bounces off of clean, polished surfaces. By polishing your chrome fittings, floors, mirrors, glass, and door knobs, the light will really make these surfaces dazzle as it streams in through the windows during inspections. This will make the house look immaculate and create a great impression on buyers. Otherwise, the light will illuminate problem areas like dusty corners instead.

It’s a good idea to capitalize on the sunlight by pulling back all of your drapes and curtains, let the light in and bathe your home in a warm glow. You can also open up the windows to let the fresh air in and get rid of any residual stuffiness from winter. Air fresheners can bother buyers with allergies, so fresh air is preferable. To further benefit from spring’s effect, position vases of freshly-cut flowers throughout the home. This will help appeal to a buyer’s senses with the combination of bright colours and delicate fragrance.

Increase Buyer Interest with Colour

In line with appealing to the senses, use colour when selling your house. Colour can be an effective tool to influence a buyer’s mood. Bright, light, cheerful colours can create an uplifting atmosphere. Replace old bath mats, linens, throws, and pillows and replace them in complementary colours that fit the spring theme. A fresh coat of light, pale paint can also bring out the best in your home by making spaces seem larger. The overall effect could lead to a quicker offer from buyers.

No matter when you choose to sell your home, it’s important to be willing to adapt to the season and circumstances. Spring provides an abundance of advantages to sellers, helping you appeal to a buyer’s wish to make a fresh start as well.

These tips may be for selling your home, but our mortgage broking team can also help you with the purchase of a new home. Whether it be refinancing or getting a mortgage. If you would like more information, please contact our friendly staff today.

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Hidden Costs on Fixed Rate Home Loans

It’s an exciting time when you find the property you want, and finally, have approval for the money required to buy it!  Because that’s the reality now, most of us rely on loans to fund our property purchases.

There are significant differences between Variable and Fixed-rate mortgages. There are also some hidden traps to look out for when comparing those loan offers, especially within this low-interest rate environment when Fixed Rate offers are being heavily promoted by lenders.

Always ensure you read the Terms and Conditions before signing on the dotted line, so you know exactly what you are getting yourself into, especially if you are thinking of paying your mortgage off sooner than the contract states.

You might think you’re protected should you need or want to get out of the loan contract. But when the federal government stepped in and banned exit fees on all new variable rate mortgages in 2011, fixed-rate mortgages were not included in the ban.

So, if you are planning on paying your mortgage off sooner than expected, a variable rate mortgage may be a more appropriate loan structure for you, or even better you could split the loan so you have the portion you know you can’t pay back for a period in the fixed portion of your loan, and the amount you believe you can pay back faster in the variable portion.

Fees to watch out for with Fixed Rate Mortgages:

Establishment fee

An establishment fee is a one-off payment when you start your loan. Usually ranging from $600 – $1,000.

Ongoing fee

An ongoing fee is charged every month or year for administering your loan – and this is usually around $10 a month.

Break cost fee 

Break cost fees, also known as exit fees, early repayment adjustment fees or prepayment fees, are charged if you make extra repayments on your loan, pay your loan off in full or decide to switch to another loan type such as a variable rate loan.

Most lenders will allow you to pay a small amount off your loan each year without being charged, this can range from $10,000 to $30,000, however, if you pay more than this amount you may incur a hefty fee.

How are break cost fees calculated?

They are essentially based on three factors: the length that remains on your loan, what interest rate you are paying (compared to your current lender’s current fixed rate), and the amount you initially borrowed. Break costs can run into the tens of thousands of dollars depending on how much interest rates have changed.

Discharge Fee 

A discharge fee, also known as a termination fee or settlement fee, will be charged when you pay your mortgage in full. This is normally $150 and covers the lender’s legal costs.

Purchasing property and using borrowed funds is a big financial commitment and therefore it is incredibly important that you seek independent legal and financial advice.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. If you would like more tailored advice, please contact us to speak with one of our mortgage brokers today.

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How Can Young People Buy Their First House?

Interest rates are currently at historic lows which have seen capital city property prices experience substantial growth. The great Australian dream of home ownership is becoming increasingly tougher for current younger generations without assistance from Mum and Dad.

Actually saving for a home deposit in this low-interest rate environment is becoming harder and harder.

Increasingly it seems children are now seeking the assistance of Mum and Dad to be able to enter the property market. For many years the only way banks would provide funding for a property purchase without a deposit was if physical cash was “gifted” to the children from Mum and Dad in order to represent the required deposit for the property purchase.

This is no longer the case, with many lenders now offering alternatives called “Family Pledge” or “Family Guarantor Loans”, where instead of cash gifts being provided to represent a 20% deposit, family members are actually able to provide a limited guarantee of an existing property security to be added as security to the new property being purchased. The property is owned in the children’s names and the limited family property guarantee can be released once the loan has either been reduced down sufficiently or the market value of the property being purchased reaches the 80% “Loan to Value Ratio” or LVR. It allows people who do not have a deposit or sufficient savings to be able to purchase a property with the support of a family member. The guarantee being provided is limited to the 20% deposit that would normally be required for the property purchase.

One of the potential benefits of these types of loans is that because sufficient security of 20% of the property purchase is being provided to the banks, you are able to avoid the expensive “Lenders Mortgage Insurance” or LMI banks would normally require if less than a 20% deposit was being provided.

An important consideration when exploring these types of loans in particular is do the children have sufficient incomes to be able to meet and service the loan repayments over the life of the mortgage, especially in this low-interest rate environment, when interest rates will inevitably rise at some point over the potential 30 year life of the loan.

Another important consideration would be reviewing income protection and lump sum insurances for the borrowers to ensure that in the event of anything untoward happening to either borrower, the mortgage is fully protected and able to be repaid.

This is still a very complex area and it is important to fully understand the risks of helping out a family member and it is therefore important that you seek independent legal and financial advice. Contact us today if you would like to learn more about our mortgage broking services.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. Before acting on anything in this article you should consider its appropriateness to you, having regard to your objectives, financial situation and needs.

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