Is buying property your new year resolution?

Consider the who, what, when, where and why of property ownership

Mortgage Choice, Australia’s largest independently-owned mortgage broker, is encouraging potential investors and ‘next’ homebuyers to fine tune their financial strategy now for 2010.

With less competition expected in the lower end of the market thanks to the expiration of the First Home Owner Boost, the new year could be a prosperous one for buyers keen to further their foothold in the Australian property market. Those who have done their research, know their borrowing limit and have a good idea of the mortgage options available will be well ahead of their purchasing rivals.

Local franchise owner for Mortgage Choice, Tony Fornaro said, “What should be a welcome relief for investors and next homebuyers is the almost-certain decline in first-time owner occupiers following the expiry of the First Home Owner Boost on 31 December 2009. Next year could mean a great new property investment for those who put their mind and money to it.”

“Those who are savvy will already be paying attention to mortgage market commentary, factoring a number of interest rate rises into their budget, checking their loan options, looking at getting pre-approval and carefully considering if 2010 is the right time for them to purchase. Deciding when is the right time can help you avoid inflated house prices and repayments you can’t really afford.”

If deciding ‘when’ they intend to buy has led to sights being set on 2010, potential buyers should consider the remaining who, what, where and why of property ownership.

“Whether it is your first or third property, buying can be daunting when you are doing it solo. So it is no surprise that 70% of our 2009 Potential Property Investor Survey respondents plan to buy with someone else, such as a partner, friend, family member or colleague,” said Tony.

“Since the GFC and partly as a result of tighter lending criteria, our brokers have noticed an increase in enquiries from borrowers looking to take out loans with others so they can share the financial and emotional commitment. Deciding who you will buy with should be a well thought out decision and it’s best to seek legal advice to understand each party’s role and responsibilities.

“Deciding on what type of property suits your long term goals is just as important. Consider what you hope to achieve from the purchase and whether a house, townhouse, unit or other fits best with that. Weigh up each property type and research the potential capital gains within the area you hope to buy, plus the demand for rentals and potential rental yield if it is an investment purchase.

“Having a good idea of where you want to buy may affect the type of property available to you. Remember that property closer to the city or coast often tends to be more expensive and so it may be necessary to make allowances for internal and external space. You may need to extend the search parameters while reconsidering what percentage of your income you can really afford to make repayments with.

“Why is all this thinking and planning - borrowing sensibly, buying a suitable property, preparing for rate rises, knowing your long-term investment strategy, etc - essential? To reduce the potential for mortgage stress, which no one wants to go through. It is important for homebuyers and property investors to have financial dreams that are manageable and attainable now, next year and in future.”

Visit Tonys website at www.mortgagechoice.com.au/tony.fornaro or call 07 3624 0755 for more information.

Don’t be a slave to Santa this Christmas

Top tips to rein in the spending spree

Most Australian’s splurge during the festive season with boisterous feasts and oodles of presents. But to have a good time, is so much expense truly necessary? This Christmas, why not clear debt rather than create it!

Christmas holidays can present quite a challenge for those managing a mortgage, as well as those looking to enter the property market in the New Year.

Local franchise owner for Mortgage Choice, Tony Fornaro explains, “Ahead of further rate rises, it’s important to ensure excess Christmas spending does not impact your ability to meet loan repayments. Meanwhile, those looking to buy shouldn’t dig too far into their savings, remembering most lenders now require at least three months of genuine savings.

“If you stick to your budget for food, beverages, presents and travel costs over the festive season you will ultimately reduce the potential for more personal debt and save money during what is often the most expensive time of year.

“Not only that, if you have a mortgage you can contribute leftover savings from the Christmas budget into your home loan, which will save time and money off your loan and can help you cope with further interest rate rises.”

“Of course, avoiding debt and maintaining a good credit history is important at all times for all borrowers - both potential and existing. When applying for a loan, lenders will take into account your credit history and assess your ability to budget and manage repayments.”

Avoid silly season spending with Mortgage Choice’s top tips:

Create a financial buffer throughout the year in preparation for the summer holidays. By repaying your mortgage above the required amount you will have more funds at your disposal, if need be.

Revisit your purchases from last year and make a list of things that were not consumed, were left over or unused. Then, create a well thought out, detailed shopping list before you arrive at shopping centre, to save you time and money spent on unnecessary items.

Set a budget for each relative’s and friend’s gift; this might encourage you to shop for a better gift rather than the first, possibly more expensive, thing you see.

Plan for the year ahead and budget for your next summer holiday spending. Organise your repayment strategy and increase your contributions when you can, start preparing your new year budget and, based on this year’s festivities, decide what you can cut back on for next year.

Simply stop and think… sometimes a minute of consideration is enough to prevent impulse buys!

Visit Tonys website at www.mortgagechoice.com.au/tony.fornaro or call 07 3624 0755.

Merry Christmas, have another rate rise

'Tis the season to be making higher repayments

In its last official cash rate decision until February 2010, the Reserve Bank of Australia has increased the rate by 0.25 percentage points for a third consecutive month, to 3.75%.

If not for the emergency-low levels reached earlier in 2009, this would be the lowest cash rateAustralia had experienced in 42 years.

Regardless, the country’s last official interest rate move for 2009 will be sure to disappoint those who are still adjusting to the increases experienced in October and November. Once lenders pass on the December rise, the average variable rate mortgage holder will be paying around $150 more per month than they were when the cash rate was at 3%.

Local Mortgage Choice franchise owner Tony Fornaro said, “The average home loan amount inAustralia is almost $270,000. Someone with that loan over 30 years at a 6.25% variable interest rate will see an additional 0.25 percentage points increase their repayments by over $44 per month or just over $10 per week.”

“The Mortgage Choice 2009 Consumer Sentiment Survey, completed in November, indicates the vast majority of mortgage holders can easily handle this, which is a relief given the economy still has a long way to go before it nears a full recovery. The latest rate rise will be a test, as we look to festive season spending from Australians and the businesses they own to contribute to the country’s economic health and vice versa.

“Our respondents with mortgages were asked what rate increases they could afford on a base of 6%, and 40% said they could afford an increase of more than five percentage points before they would need to consider selling their property. That means well over one third of our respondents could afford repayments at 11%.

“Impressively, 17% said they could afford ‘any’ increase. At the lower end of the scale, 14% could afford an increase of four to five percentage points, 13% between three and four points, 15% between two and three, and 6% between 1.5 and 2 percentage points. 6% said they would consider selling after any new rate rise.

“The Reserve Bank’s next official cash rate meeting is not until February next year, so hopefully the next two months provide a reprieve in repayment increases for mortgage holders.”

Visit Tony’s website at www.mortgagechoice.com.au/tony.fornaro or call 07 3624 0755.