ACCC REPORT REPRESENTS ‘OPPORTUNITY’ FOR BROKERS

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A new report into mortgage pricing has shown that a lack of transparency is stifling competition, with the heads of the broker associations highlighting that this presents a prime “opportunity” for brokers to help borrowers.

The Australian Competition and Consumer Commission (ACCC) released the final report of its mortgage price inquiry on Tuesday (11 December), which monitored the prices charged by the five banks affected by the government’s major bank levy between 9 May 2017 and 30 June 2018.

The report was initiated by the commission after the Treasurer directed the body to inquire into prices charged by the financial institutions affected by the major bank levy (ANZ, CBA, NAB, Westpac and Macquarie Bank) to understand whether the costs of the levy were being passed on to borrowers.

While the ACCC did not find evidence that the five banks were changing prices specifically to cover the cost of the levy (whether in part or in full) over the monitoring period, it did find that the mortgage market was characterised by “opaque discretionary pricing practices” that cause “inefficiency” and “stifle price competition”.

ACCC chair Rod Sims said: “Pricing for mortgages is opaque and the big four banks have a lot of discretion. The banks profit from this, and it is against their interests to make pricing transparent.

“Borrowers may not be aware they can negotiate with their lender on price, both before and, particularly, after they have established their mortgage.”

A main finding of the ACCC report was that new borrowers pay lower interest rates than existing borrowers. According to the ACCC, new borrower loans were, on average, up to 32 basis points lower than existing borrower loans (depending on the category of residential mortgage).

This, it suggested, could be worth up to $1,000 per year for the average mortgage holder.

Mr Sims therefore urged “more people to ask their lender whether they are getting the lowest possible interest rates for their residential mortgage and, as they do so, be ready to threaten to switch to another lender”.

“I am afraid that the threat of switching banks will often be necessary to achieve a competitive mortgage rate,” he added.

While mortgage brokers play an intrinsic part in finding an appropriate home loan for borrowers, the report touched on brokers only briefly, and this was largely in relation to how smaller lenders rely on the third-party channel for distribution.

‘Brokers find consumers a better deal’: FBAA

Speaking to The Adviser following the release of the report, Peter White, managing director of the Finance Brokers Association of Australia (FBAA), argued that while he appreciated that the report was focused on “transparency of how interest rates are priced”, he said that the findings marked an “opportunity for brokers to highlight that this is what brokers do – finding consumers a better deal”.

Mr White told The Adviser: “I understand why mortgage brokers weren’t more profiled across the report because that is not how it was being positioned. Instead, it was looking at how the banks, and the majors in particular, actually create the pricing decisions on mortgages.

“But that said, the thing that I was surprised wasn’t mentioned that should have been is that this is one of the value-added propositions of mortgage broking.”

The FBAA MD elaborated: “Mortgage brokers are consistently helping clients to negotiate a better deal with their banks because they know that the banks do this. And when you can’t get a better deal or the loan is not suitable, then they look at refinancing options.”

Anecdotally, Mr White said that between 30 and 55 per cent of loans written by FBAA members were for renegotiation of a client’s loan with their existing bank.

He said: “This saves borrowers money, because they not only can achieve a lower interest rate, but they also don’t have the costs of having to move their loan, which can include costs for things such as mortgage insurance, new valuations, legal fees, etc.

“So, the mindset of the professional broker is to help clients get a better deal with the lender they are with. If that is not possible, then they are able to showcase the other options in the market place. This is part of the value proposition of brokers.”

Mr White concluded: “We see, once again, in the ACCC report that the banks are not being transparent about rates. And this was a theme that was raised in the royal commission, too.

“If you take the brokers out of the game, imagine how much worse it would be. Because we are the ones keeping the banks honest.”

‘In an economy devoid of mortgage brokers, most smaller lenders simply could not compete’: MFAA

The Mortgage & Finance Association of Australia (MFAA) also welcomed the report, specifically noting that the ACCC recognised the competition driven by smaller lenders, which is supported by the mortgage broking channel.

“As we have stated repeatedly in our responses to multiple regulatory reviews, from the ASIC Remuneration Review to this year’s royal commission, scrutiny on the financial services sector is entirely appropriate,” the MFAA said.

“It is also appropriate for the mortgage broking industry – we are now systemically important to the Australian economy, given that mortgage brokers now originate more than 55 per cent of all home loans in Australia.

“This is the reason the MFAA has supported industry reform and was instrumental in the formation of the Combined Industry Forum (CIF). The CIF has driven a broad range of reforms (in response to ASIC’s 2017 review), aimed at addressing potential conflicts which have allowed the industry to get ahead of the curve in seeking to continually improve the customer outcomes we are producing,” the association continued.

However, the MFAA said it was “critical that unintended consequences are considered before any regulatory change is implemented”.

The broker association highlighted a recent Deloitte Access Economics report, which found that the average broker earns $86,400 before tax, so “any significant reduction to commissions is likely to severely rationalise, if not decimate, the industry, as many brokers would not be able to continue to run their small businesses”.

“The result would be devastating for smaller lenders, and therefore catastrophic for competition, choice and access to credit for consumers, compounding the fact that credit has already been tightened due to a range of other factors,” the MFAA said.

It concluded: “The ACCC’s finding, that small lenders ‘are likely to be more vulnerable to future regulatory changes that affect the use of brokers as a distribution channel’, reflects exactly what the MFAA has been communicating to policymakers, Treasury, media and other stakeholders. In an economy devoid of mortgage brokers, most smaller lenders simply could not compete.

“With the smaller lenders removed, Australian consumers would be left with the choice of just a handful of lenders, or fewer if they live in a regional or rural area. This will lead inevitably to less competition, less choice and ultimately, higher prices, which would not be a good customer outcome at all.”

Contact Geoff if you’re looking for a better home loan deal or if you have any lending needs.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

FALLING HOUSE PRICES SET TO LEVEL OUT

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The country's falling property prices will stabilise next year before moving into a moderate growth phase, new research from Domain Group has predicted.  Domain's first Property Price Forecast has modelled median house and unit prices in the capital cities to the end of 2020.

Domain Group economist Trent Wiltshire said solid population growth, low unemployment and low interest rates underpin property price growth in the period to the end of 2020.  "We think the market will correct itself in 2019, and then change gears into a cycle of modest growth into 2020," Mr Wiltshire told 9News.

Domain predicts unit prices will be more resilient, in part due to stamp duty concessions in Sydney and Melbourne.   Unit prices are expected to grow nationally by two percent in 2019 and three percent in 2020 after bottoming out to their 2016 levels early next year.  Domain's forecasts are based on what the group believes is most likely to play out over the next two years.

But it warns the positive forecasts could be thrown out by mortgage rates rising earlier than expected, slower population growth, forced selling by investors, and a slowdown in the Chinese economy.

Labor's proposed changes to negative gearing, should it win next year's federal election, could weigh on house prices in long-term but may also provide a short-term boost.

"I think for people looking to buy there's still some bargains to be had," Mr Wiltshire said.

SYDNEY

In Sydney, house prices are currently eight percent below their peak and will be close to unchanged to December 2019 before modest growth in 2020.  "For Sydney, we're seeing house prices unchanged in 2019 and to grow by about four percent in 2020," Mr Wilshire said.  The median house price should reach a low point of just over $1 million in mid-2019, a fall of about 12 percent from the peak of $1.2 million in June 2017.

"On our forecast, the price falls for Melbourne and Sydney will be the biggest since the late 1980s," Mr Wiltshire said.  Over the past four weekends, more than 1100 properties across the city have failed to sell at auction across Sydney.

Mr Wiltshire said this combination of high supply and fewer buyers typically brings lower prices.

For apartments, however, he said prices will continue to fall by an average three percent this year, and are expected to rise by the same amount next year and then a further five percent in 2020.

MELBOURNE

There's some good news for Melbourne home owners following a turbulent twelve months for the city's property markets.  After a nine percent fall in house prices this year, the Domain research shows a further decline of about one percent next year, before growing by around four percent in 2020.

"That's probably driven by things like the royal commission, and tighter bank lending standards playing out into 2019," Mr Wiltshire said.

The house market peaked at the median price of $910,000 in December last year, with Domain's report forecasting it will bottom out just above $800,000 in mid-2019; a level equivalent to late 2016.

Unit prices are expected to grow by about one percent in 2019 and 2020, after a fall of up to two percent this year.

BRISBANE

Thanks to a slow down in construction and a strong population growth, Domain said Brisbane median house prices should rise by four percent in 2019 and five percent in 2010 after a flat year to date.

The rise puts Brisbane right near the top of Australia's fastest growing markets.

"For Brisbane, we see some of the strongest price growth in the nation over the next couple of years," Mr Wiltshire said.

"That's a lot to do with people moving from New South Wales and Victoria to Queensland due to more affordable housing."

After falling by about six percent this year, unit prices in Brisbane are also expected to grow over the period to the end of 2020.

"We see a bit of a turn-around coming in 2019 after a few years of price falls, and we're predicting unit prices in Brisbane to increase by about three percent over the next couple of years," Mr Wiltshire said.

Elsewhere in Queensland, some areas are already experiencing growth.

In Caboolture, prices have grown by almost 10 percent in the last year and unit prices have jumped by 17.5 percent.

ADELAIDE

Adelaide house prices will continue to rise steadily over the next two years.  The Domain property report shows South Australia has performed well this year, compared to other mainland states.

"We're seeing house and unit price growth to maintain at about two percent over 2019 and 2020 and this slow and steady growth is a continuation of what's been happening in the Adelaide market for the last few years," Mr Wiltshire said.

Domain is cautious about Adelaide's population and employment growth.

SA has fewer property investors, with two thirds of new bank loans being taken by owner-occupied homebuyers.

For units, there has been a one percent price drop this year, but that's expected to turn around with a two percent rises in 2019 and 2020.

PERTH

Domain expects Perth house prices will grow faster than most other markets in 2019 and 2020 after falling in recent years.  Prices are predicted to level out by early 2019 after falling 13 percent from the 2014 peak of $616,000, including a five percent fall this year.   Prices will then grow by five percent in 2019 and another three percent in 2020, Domain predicts.

Unit prices are expected to fall by about six percent in 2018, before growing by about two percent in each of 2019 and 2020.

With prices falling in recent years after the end of the mining boom, Domain attributed the incoming growth to better economic conditions such as higher commodity prices and population growth.

HOBART

The Tasmanian capital is on track for the fastest growth in the country in 2018 at 12 percent.  That would leave house prices 40 percent higher than the start of 2016, but Domain predicts the growth will slow to two percent over the next two years as mainland housing becomes better value for buyers.

Unit prices in Hobart should remain stable in 2019 before seeing some modest growth in 2020.

CANBERRA

The research suggests house prices in the nation's capital will grow by about two percent in 2018 and then four percent in each of the next two years.  Low unemployment and strong population growth underpins Domain's forecast for price appreciation.  The forecast for unit prices in Canberra are more uncertain but Domain predicts slower growth than houses.

Contact Geoff to discuss your lending needs.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

IS BUYING TO ‘FLIP’ STILL VIABLE IN TODAY’S MARKET?

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With the property boom of recent years and the popularity of TV renovation shows like The Block and House Rules, increasing numbers of Australians have been ‘buying to flip’ – buying a property, renovating it and selling it at a profit.

Buying to flip can be lucrative when property prices are rising rapidly, but is it still a viable option in today’s softer market?  The answer is it can be.  You will, however, need to:

• do your own research and due diligence

• be in a strong financial position

• consult a mortgage broker for the best finance arrangements.

WHAT SHOULD POTENTIAL ‘FLIPPER’ BE AWARE OF?

Buying ‘the right’ property

What’s the right property for you to flip?  The answer to that may come from research into the local area to work out exactly where good value may lie.  Ask yourself questions like:

• What are the historical values for this property and others on this street?

• How much can you spend before overcapitalising?

• Is the property attractive to the demographic of the area?

• Is the property structurally sound?

• How long are properties sitting on the market for?

• What is the area the property is in zoned for – one-level residential only or multi-level dwellings?

You’ll also want to find out whether there is anything planned that could stimulate future demand.  Are there any new developments – such as investments in infrastructure, or schools or shopping centres under construction – that could attract new people to the area and drive up property prices?

The costs involved in buying and selling

Property is typically not a short-term investment – it’s time-consuming and expensive to buy and sell.  When buying a property to flip, the following costs need to be covered:

When buying

• Loan establishment fees

• Building and pest inspection reports

• Legal fees

• Stamp duty

While renovating

• Labour and materials

• Mortgage repayments

• Rates for holding period

• Accommodation costs (if you have to move out for a period)

• Storage costs (for any furniture)

When selling

• Marketing costs

• Real estate agent fees

• Legal fees

• Loan exit fees

• Mortgage repayments and rates

Therefore, it makes sense to be in a strong financial position and be confident you can add value quickly and easily.

WHAT ARE THE POTENTIAL RISKS IN BUYING TO FLIP?

Timing the market

Property is typically a long-term investment.  So, if you’re looking to make money on it in the short term, you’ll usually need to add value to the asset and benefit from a rapidly rising property market.

In reality, the market can cool quickly if changes to lending policies or higher interest rates come into play.  These factors can be hard to predict. If you need to make a sale and your property sits on the market longer than expected, it’s perceived value can erode with each passing day.

Costs blowing out

Clearly you want your renovation completed as quickly and efficiently as possible, but sometimes there can be costly and time-consuming surprises to address. One way to limit this is by getting a comprehensive pest and building inspection.  Unfortunately, you usually won’t add value through remedial work; buyers will pay a premium for lifestyle and aspiration – less so for a new roof!

SOME THINGS TO CONSIDER

The work that needs to be done

Flippers need to consider whether simple cosmetic improvements and good styling will be enough to entice buyers.  Will a paint job, new flooring, stylish lighting, a kitchen and bathroom refresh, and some garden work be enough to showcase the property and its lifestyle potential?

Financial and tax implications

As with any project, funding is what will keep it afloat. How will you cover all the costs you incur?  Will you be financially stretched to achieve your goals for the property?  And can you afford to hold onto it if you can’t sell it for what you’d like?

Another consideration is Capital Gains Tax (CGT).  Given this will be payable on any profit you make, it may make sense to consider strategies to minimise the amount payable.  These could include holding the property for at least one year to access a 50 per cent CGT discount, or selling in a low-income financial year. For more information on this, you may want to seek independent tax advice from an appropriately-qualified professional.

Advice from experts

Getting quotes from tradespeople to fully cost out the work is key to planning a renovation and running a project to budget. It may also be more efficient to get professionals to carry out the work, rather than trying to be the expert in all areas.

Likewise, it makes good sense to consult a mortgage broker experienced in financing buy-to-flip acquisitions.  This will help you get the right loan for your needs – such as one that offers a honeymoon period of lower repayments at the start of the loan.  Getting the right loan in place can help set you up for success!

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

WHY SOME INTEREST-ONLY BORROWERS ARE KEEN TO SWITCH

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New government regulations mean interest-only loans are on the decline.  Given the changes, it may be time to reconsider your own loan structure.

Rewind a few years and many people would have confidently assured you that an interest-only loan – a home loan on which you only have to make interest payments for a set period of time – was the way to go. Its benefits were clear to many owner-occupiers and investors.

For those buying their first home, for instance, it provided an opportunity to get on top of the initial costs of buying a place before they were hit with the full force of principal and interest (P&I) repayments.  For those investing in property, it was a great chance to get a tax break, without tying up all their funds in the one asset.

Interest-only on the wane

In early 2017, however, the Australian Prudential Regulation Authority (APRA) put a cap on the number of interest-only home loans banks could offer, down to 30 per cent of all new mortgage lending.  As a result, competition intensified and interest-only rates jumped well past P&I rates.

Since then, far fewer people have taken up interest-only loans while a growing number have made the switch to P&I mortgages – whether or not their interest-only period had officially ended.

As a result, the stock of interest-only loans in total housing credit declined noticeably over the past year, from close to 40 per cent of all loans to almost 30 per cent.  This represented a $75 billion reduction in interest-only loans from about $600 billion in late 2016.

Doing the sums

It’s not surprising that a significant portion of the Australian population has swapped from interest-only loans given the interest rate differential. But it’s not the only reason to rethink your options.

In fact there are a number of reasons to rethink your interest-only loan, once you sit down and do the sums:

Your total interest bill - It’s worth considering the interest you’ll pay over the life of the loan.  The longer you wait to chip away at that principal, the more interest you’ll be paying in the long run. For instance, a $450,000 loan over 25 years with an interest rate of 5 per cent could see you paying an extra $36,055 in interest if you took out an interest-only loan for the first five years.

Go for low - Today’s interest rates are very low – for now.  Why not take the opportunity to reduce your mortgage before its hit by higher rates?

Build equity - If the housing market takes a dip, you risk being left with little to no equity in your home. That leaves you vulnerable to losing your family home.

Know your budget - Can you afford your repayments over the long term?  Inevitably the interest-only period will end and you’ll be faced with paying the principal and interest. Plus, with less time to pay it off, your repayments are likely to be quite a bit higher.

Save today - It may be that you’ve got used to having the additional cash, spending it on a mix of day-to-day necessities and luxuries instead of investing it or paying down debt.  That might leave you ill-equipped to handle higher repayments and worse off in the long run.

Avoid a fire sale - Come 2020, about two-thirds of interest-only loans are due to expire.  While the Reserve Bank of Australia plays down the effect this will have on Australia’s economy, it does acknowledge that some of these borrowers may experience genuine difficulties in meeting their higher repayments and as a result will be forced to sell.  That’s not a situation any owner-occupier wants to be in – especially as a good number of other people will be forced to sell at the same time.

Contact Geoff to discuss any of your lending needs.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

WHEN IS THE BEST TIME FOR BORROWERS TO FIX THEIR INTEREST RATE?

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Borrowers unsure on whether to lock in their interest rate should be reviewing their mortgage now as more rock-bottom fixed-rate deals appear.

Variable rates are still cheaper than the best three-year fixed rate terms available but customers need to be prepared for rate rises at any moment.  In the past few weeks Westpac, ANZ and the Commonwealth Bank have all pushed up their variable rate deals.

New analysis by financial services firm Canstar has revealed for a borrower with a $300,000 30-year home loan deal the lowest variable rate deal is 3.44 per cent.  This compares to the cheapest three-year fixed rate at 3.69 per cent.

Canstar’s finance expert Steve Mickenbecker said there has been many rate fluctuations in the market recently making it “a good time to consider fixing all or part of your borrowings.”

“On an average loan of $300,000 over 30 years the difference between the highest and lowest three-year fixed rate offers can be as much as $240 per month or close to an extra $3000 per year,” he said.

“Right now lenders have been moving fixed rates down for the spring/summer selling seasons.”

Three-year fixed rates are typically a popular term for borrowers to lock in their rate.

The Reserve Bank of Australia has failed to move the cash rate from 1.5 per cent since August 2016 but despite this lenders are still moving rates up and down as they please.  So for borrowers looking for security against rising rates fixing is a good option or alternatively borrowers can lock in a portion of their loan.

However there are break costs if a customer is looking to break the loan early, for example if they need to refinance or selling up.

Aussie Home Loans’ chief executive officer James Symond said borrowers should definitely be reviewing their loan to see if now is the time to fix.  “With interest rates edging up it is definitely worth borrowers inquiring about whether to fix part or all of their mortgages,” he said.  “Fixed rates provide certainty of repayments so households can budget their monthly expenses accurately.”  Mr Symond said he believes the next move for official interest rates will be up and borrowers need to be prepared for this.

Contact Geoff if you wish to discuss fixing all or part of your home/investment loan or if you have any questions.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

WHAT YOU SHOULD KNOW ABOUT YOUR CREDIT HISTORY

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Have you ever taken out a personal loan, owned a credit card or purchased an item on store credit? If you answered yes to any of these questions, chances are you have a credit report and credit history stored on file.

The big question is: How does your credit file represent you as a potential borrower?

We explain why it’s important to know what your credit file says about you.  It will affect your chances of getting a good interest rate on your home loan, or even if you can get a mortgage at all. 

What is a credit file?

Your credit file details your financial history and outlines your previous dealings with credit providers, such as credit card companies, as well as listing late payments you may have made.

It will contain information regarding all credit applications you have made in the past five years, any existing loans or outstanding debts, and default notices where payment has not been made in over 60 days.  It will also contain fraud convictions and bankruptcy orders.

Why it matters

When it comes to taking out a home loan, lenders will assess your credit file to determine your eligibility as a borrower.  If you’ve ever missed a credit card repayment or let a phone bill slip, these minor instances may be recorded on your credit file.

Although they may appear harmless, a credit file with multiple missed payments can say a lot about your credit habits and potentially limit the amount a lender is willing to offer you.

It’s therefore essential to keep your credit file as squeaky clean as possible to maximise your chances of being approved for the loan you need.  You can do this by making regular repayments on any loans and ensuring all bills – even the smallest ones – are paid on time.  Setting up a direct debit arrangement might help.

If you’re concerned about the health of your credit file, you can request a free copy from www.mycreditfile.com.au

Fixing a bad credit rating

If you do have a bad credit rating or a missed or defaulted payment listed in your credit file, it’s best to try and deal with that before you start applying for home loans.  The first thing you need to do is pay off your debt.  Contact your financial institution and work out a payment plan, or if you have multiple debts, see what you can do about consolidating your debt. 

If you’re worried about not being able to pay off your debt, you should contact a financial counsellor or advisor. 

Notices on your credit file will remain there for five years, so it’s worth thinking about your finances sooner rather than later. 

Get the right advice

A mortgage broker can talk to you about how your credit rating will impact your home loan. 

Talk to Geoff about finding the right home loan for you.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

MORE THAN HOME LOANS: WHY A BROKER CAN HELP YOU WITH COMMERCIAL AND ASSET FINANCE

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Mortgage brokers have expertise in residential and other property loans. They can also play an important role in helping businesses find and secure commercial and asset finance at competitive rates, by leveraging their network of lending institutions.

With so many lenders and products to choose from, it’s important to get the right business funding mix from the outset. Many brokers have a deep understanding of the commercial sector and the wide range of products available. They’re well placed to identify the most appropriate financing structures for you, based on your type of business and specific needs.

Here are some advantages to having a broker manage your commercial and asset finance.

Managing cash flow

For any business, big or small, good cash flow is vital. You need the financial capacity to meet day-to-day operational costs.

Mortgage brokers can help with cash flow finance. This is essentially a way for a business to get cash before your customers actually pay. It may be through invoice discounting, which allows a business to access a proportion of your debtors’ unpaid invoices through the lender. It could be through invoice factoring, where the lender takes responsibility for chasing your business’s debts.

Mixed funding for manufacturing assets

Businesses involved in manufacturing need the right plant and equipment to remain competitive. They also need financial arrangements designed to suit the industry.

Manufacturing equipment may be purchased from offshore vendors or made to order. This could initially require short-term financing arrangements, to be later replaced with longer-term asset funding. Additionally, a manufacturer with specialised equipment will probably need a more long-term solution than a business needing to purchase an asset such as a motor vehicle, or one that needs funds to complete a shop fit-out or to buy a commercial property.

Mortgage brokers can play a crucial role not only in financing your manufacturing assets but in recommending the most appropriate lending facility.

Range and flexibility

With dozens of different lenders in the market, mortgage brokers are in a strong position to compare and find the most competitive commercial and asset finance products.

When necessary, they also have the flexibility to use multiple lending facilities to suit different business purposes. For example, a business may need a chattel mortgage for its plant and equipment, but a finance lease for other assets.

Using a mortgage broker means you have all the available lending options at your fingertips.

One-stop finance

Mortgage brokers do much more than arrange finance for home loans; they’re also an invaluable resource for developing businesses. Brokers can help to identify and secure commercial and asset funding to enable your growth, while at the same time preserving your operating cash flow.

Your broker can be a one-stop-shop for your financing needs. Contact yours to find out more about how they can help you with commercial and asset finance.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

Investing Interstate

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When people think of buying an investment property, many only think locally. Investing in a property interstate could possibly be a smarter idea, potentially resulting in a better return on your investment.  It may also be a potential way to snaffle a bargain. You could be buying into an area with greater potential capital growth compared to your home state – as each state reaches different stages of the property cycle at different points.

Some of the key issues to keep in mind include:

The logistics of property management

Some may find it hard to manage their investment property from another state.  It can be costly maintaining a property and finding tenants if you regularly need to travel between states. Although employing a property management service may be able to help here.

Property managers undertake several jobs that can be difficult for an interstate investor to do. They can screen your tenants, source the best local tradespeople for repairs and, by inspecting the property on your behalf; can save you the expense of flights for site visits.

While you may be recommended a property manager by your real estate agent, it’s a good idea to shop around, given there’s usually some variation in the nature and quality of the service that managers provide.

Some, for example, might provide an annual market rent review but others might go to the next level and give you feedback on how you can optimise the rental income on your interstate investment.  Not all property managers will be as effective at managing the property or screening tenants - while others could be better qualified and so the fee they charge for their services could vary.

Get a pre-approval

Pre-approval is important because it informs you about barriers you can encounter when you seek to arrange finance for an interstate investment.

Certain lenders can be restrictive in the terms and conditions they attach to loan approvals in different parts of the country.

The location of the property could impact the amount you can borrow from a lender – and it’s important to remember different states have different fees and taxes.

Getting a pre-approval can give you the confidence you need to make a sound investment decision.

Visiting the property

Visiting the property and seeing it is more telling than simply viewing pictures.  But the travel and cost associated with investing in interstate property obviously imposes limits on the time you can spend seeing the property.

A buyer's agent is one potential fix, but it's costly to pay a buyer’s agent to tell you a property is potentially a poor investment once, let alone several times.  Likewise, it's expensive to make the discovery yourself after you shell out for flights and associated travel expenses, so it pays to research the property and area as diligently as possible prior to undertaking closer physical checks.

The internet is a great source of valuable information, including property guides and market updates.

As with any property, local or interstate, there are pros and cons and you need to conduct your due diligence to ensure you make a good decision.

To decide if interstate property is a suitable investment for you, it's worthwhile consulting with a finance broker about the considerations to be mindful of before applying for finance.

When you're confident you’ve identified a suitable interstate investment property, a broker will be on hand to support you to get an appropriate loan for your needs.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

Buying A Tenanted Investment Property

buying-a-tenanted-investment-property-sydney-prospera-finance-mortgage-broker-refinance-home-loans

There are plenty of upsides to buying an investment property that already has a tenant, as well as a raft of risks. Here’s how to minimise them.

  • Purchasing an investment property that already has a tenant means you collect rent from day one, with no vacant period and no lease fees to find a new tenant. The lease just carries on as it did before you purchased the property. Sound good? Of course it does. There are some possible problems to be aware of though.

  • It’s very important to check whether the lease on your prospective investment is current or the tenants are on an expired lease. If the tenants are off-lease, they can give a short period of notice and vacate the property, so those upsides mentioned above could come to nought.

  • A current lease, on the other hand, offers security, it also means that you are stuck with the lease, its conditions (or lack thereof), the current rental return and the tenants.

    There are steps you can take to minimise your risk:

  • Make sure the bond has been lodged properly. Your agent will arrange for the bond guarantee to be transferred into your name on settlement.

  • Check the property condition report, making sure that it is a complete and accurate record of the property as you inspected it.

  • Ensure there are no rental arrears. If there are, or if a landlord has agreed that rental arrears can be taken out of a bond payment, stipulate that this amount is deducted from the purchase settlement amount.

  • Ask the leasing agent about the tenants and their payment record. You cannot demand that you meet the tenants, but attending the open house will give you a sense of how they live in the property. If possible, sight the tenants’ original application for the property and rental ledger.

  • Look at the yield for rental properties in the area and compare them to yours. You won’t be able to increase the rent until the end of the lease.

  • Be aware of any concessions or conditions that are either in the lease or have been agreed with the landlord or property manager, because these will become your responsibility. For example, does rent include electricity or other utilities? Has the landlord agreed to install a new oven or paint a room?

  • Of  course, if you love a property but have doubts about the tenants, the lease or the managing agent, all is not lost. You can easily change the managing agent when you settle. You can also make vacant possession of the property a condition of settlement. You may need to wait until the lease expires to settle, but you aren’t taking on the previous owners’ problems and responsibilities.

If your only problem with a tenanted property is the rental yield, keep in mind that increasing rent on a good, long-term tenant may well drive them away anyway, so do your sums. Work out whether the amount you’d like to increase the rent by equates to more over the year than the lease fee plus any rent lost if your property is vacant for a few weeks.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

CONFUSED ABOUT HOME LOAN PRE-APPROVALS?

confused-about-home-loan-pre-approvals-sydney-prospera-finance-mortgage-broker-refinance-home-loans

Ready to buy a property? You’ll need to show the seller you have enough money. For most people, this will mean getting a loan, and the first step to getting one is obtaining pre-approval for it.

Pre-approval – also known as conditional approval or approval in principle – is an indication from a lender as to how much you can borrow. If you have pre-approval, vendors and agents know you’re serious about buying. Here are the steps you need to follow.

Gather your financial information

To get an idea of how much you can borrow, and therefore what you can afford to buy, you need to give the lender a comprehensive picture of your finances. This includes your income and assets, and your financial obligations such as existing debts and living expenses (including ongoing bills, entertainment, food and car expenses, etc).

You’ll need evidence of everything:

  • Pay slips and tax returns for your income.

  • Title deeds for tangible assets (i.e. physical items such as buildings, machinery and inventory), and portfolio statements for intangible assets (non-physical items such as copyrights and patents).

  • Loan statements for existing loans.

  • Credit card statements showing your credit limit. If you already stick to a budget and have a regular savings history, you may want to provide bank statements to demonstrate this.

You can use all of this information to get an idea of how much you may be able to borrow. There are a number of free mortgage tools and calculators that can help.

Meet a lender or broker

Make an appointment to speak to a lender or mortgage broker. Most will provide a list of what you need to bring with you, such as the evidence explained above and the required forms of ID.

At the appointment, the lender or broker will use your information to calculate an approximate borrowing figure. If you want to proceed, you can fill in a pre-approval application form.

Undergo a credit check

The lender will arrange for an independent credit bureau to perform a credit check on you. This may affect whether or not you can borrow money, and how much.

Receive conditional approval

Assuming your credit rating allows you to borrow, you’ll then receive a conditional approval certificate from the lender. The certificate is usually valid for 90 days. This is an indication, not a guarantee, of the amount you can borrow.

Use this figure to work out how much you can spend on a property, taking into account the size of your deposit. Factor in expenses such as conveyancing fees, stamp duty and so on. Also consider that you may not be able to borrow as much as the conditional approval certificate indicates.

Securing pre-approval will allow you to house-hunt with confidence.

What happens next

Once you’ve put in an offer on a house – whether at auction or a private sale – you’ll need to get full approval on a loan. Contact your lender or mortgage broker with details of the property, and they’ll work through the home loan application process with you.

Obtaining pre-approval for your loan is an important part of the home-buying process. Contact your mortgage broker today for help with finding out how much you can borrow.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

HOW TO NEGOTIATE IN A SOFTER HOUSING MARKET

how-to-negotiate-in-a-softer-housing-market-sydney-prospera-finance-mortgage-broker-refinance-home-loans

Seller expectations are high but buyers want low prices – what’s to be done? Two real estate agents detail how to negotiate in a declining market.

After years of rapidly rising house prices, the recent slowdown took many people by surprise – not least those with a home to sell.

“For a while we had a situation where buyers were aware the market was dropping while sellers still assumed it was strong, so there was a big gap between their expectations,” says Anton Zhouk, Director of the Buxton Real Estate Group at Boroondara in Melbourne’s eastern suburbs.

“Now people have had time to adjust so, when it comes to negotiation, the gap isn’t quite so wide.”

Whatever the state of the market, every negotiation is based on the same premise – vendors want to receive the highest possible price while buyers want to pay as little as possible. Both, however, need to give careful thought to how they approach a negotiation when the market is in decline.

Be realistic

“From a vendor’s point of view, it’s crucial that you price your property correctly from the start,” Zhouk says. “The most incredible homes in the world won’t sell if they’re overpriced.”

Jane Booty, Principal of Stone Hills District Real Estate in Sydney, agrees that vendors must be realistic.

“Some potential buyers are waiting for prices to fall even further so there fewer actively looking,” she says. “They have more properties to choose from so it’s harder to convince them to pay a premium price. And the longer a property stays on the market, the less likely it is to sell at a higher price – buyers can look up how long it’s been for sale and will use that against you.”

She suggests that vendors try not to think in terms of losing money.

“Unless you bought in the last two years or so, you’re probably going to get a higher price than you paid,” she says. “And, of course, if you’re selling to buy, you’ll be paying less yourself. It can be more helpful to think in terms of the changeover price, rather than fixate on the price you may have been able to achieve a few months ago.”

Take offers seriously

If a property is on the market now, it’s there for a reason.

“This isn’t a time to be testing the market or selling a property if you’re not in a hurry,” Booty says. “If you do need to sell you should be prepared to take every offer seriously, even if it’s not at the level you were hoping for. At least enter into negotiations to see how far you can get your potential buyer to go.”

When buyers have the upper hand, presentation is particularly important.

“You need to be clear about the attributes of your home – the unique selling points that make it desirable,” Booty says. “It’s also worth spending some time and money on minimising anything that would cause concern. You don’t want potential buyers to go away with the impression that there are another five homes they’d be equally happy with.”

A good agent can help you identify your property’s strengths and weaknesses then demonstrate and sell its strengths.

“In a softer market, it’s vital that you start by getting good advice on everything from pricing to presentation,” Zhouk says. “The right agent will also help you market the property effectively. This needs to be considered on a case by case basis – for example, advertising in print media may work well for some but, for others, it would be a waste of money.”

Be ready to act

As a buyer today, you’re well placed – but you shouldn’t be too complacent.

“If you see a property that appeals to you, it’s also likely to appeal to other people so you can’t afford to sit back and wait in the hope that the price will fall,” Booty says. “At least throw your cap into the ring and start the negotiation process.”

Zhouk believes that today’s buyers are in a fortunate position now that the market has settled – though no one knows for how long.

“The only way you can tell when the market’s hit the bottom is when it starts to come back up,” he says. “By then, you could be too late.”

Some tips to help get the best results from your negotiation

If you’re selling

  • Set a realistic price from the outset

  • Find a real estate agent you trust and act on their advice

  • Take extra care with presentation – you want potential buyers to fall in love with your property

If you’re buying

  • Do your research – be clear about a realistic market price

  • Let the agent know if you’re interested in a property

  • Don’t wait too long for a bargain – the market could turn at any time

 

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

WHY YOU ARE THE BEST PERSON TO SELL YOUR HOME

why-you-are-the-best-person-to-sell-your-home-sydney-prospera-finance-mortgage-broker-refinance-home-loans

Expert Observer

We’ve just entered what is traditionally the busiest time of the year for selling and it’s going to be a tough season.  Property markets are cooling causing an increasingly tight and competitive market for those looking to sell.  To achieve the best possible price in the current environment it is essential that sellers have greater control and visibility over the entire sales process – but how do you do this when you’re not actually in control?

Doing it yourself (DIY), is the best way to position yourself at the centre of a sale, and achieve the best outcome for you.  You are actually the best person to sell your home as only you have your best interests at heart.

The benefits of selling, yourself

We’ve often heard that vendors believe they need a professional to facilitate the sale of their largest asset.  Our response to that is with that much at stake, shouldn’t you, the seller, maintain control?  It’s a level of transparency that is very difficult to achieve with an agent, though can be achieved by taking the property to market yourself.

North America and Europe boast a significant portion of the market as DIY sales, with 23% of homes sold privately in Canada, 9% in the USA, and 44% in France.  This sees vendors successfully transacting directly with the buyer market, realising the significant benefits of control, visibility and savings on commission.  Whether selling yourself, or engaging an agent, information is power.

Dedicated service

As the vendor, you are selling one property – your property.  You have only one motivator; to sell your property at the best possible price.  This means you can choose when you have open for inspections whether it’s during the week, after work, on weekends – it is completely up to you.  You won’t need to limit potential buyers to a quick 30 minutes on a Saturday afternoon or the middle of the day when everyone is working.

Property knowledge

Agents will tell you no one knows local real estate like they do, and when it comes time to market the property, vendors are asked to leave their property so as not to “scare off” any potential purchasers.  However, no one knows your property and your street like you do.  You will always have a knowledge advantage over any agent, whether it be electricity costs, sunniest spot in the garden, or Joe across the road who keeps an eye on the place when you go on holidays – buyers love to hear these insider details from you.

Further, sellers are reliant on agents to tell them how many people attended, how many are interested and how many requested a copy of the contract.  You never actually get the chance to engage with interested parties as they’re the property of the agents – agents who are not only responsible for the sale of your home, but the raft of other properties on their books.

Open for inspections continue and interest builds, still, the vendor has no contact with these ‘interested’ parties.  The entire sales process is in the hands of the agent, a person who hasn’t slept a single night in the home and doesn’t know the unique benefits and quirks of both the property and the surrounding environment which make for outstanding sales attributes.

Money, money, money

The costs you will need to pay an agent upon the successful sale of your property can vary – often between 1.8 and 3 percent of the sale price.  On a $600,000 home, that’s almost $20,000 you need to pay out of the sale of your home, out of your pocket.  That’s a lot of money that could go to better use.

Immediate response to buyers

Provided you give them the privacy to look around, buyers appreciate the opportunity to ask questions of the owner directly, rather than filtering through an agent which draws out the process.  You can manage open for inspections well by giving a quick outline of the house layout and advising buyers to come to you should they have any questions.  Invariably the buyers have queries, whether it’s about recent renovations or a tree in the backyard so best to deal with these efficiently, and honestly.

Negotiation

Negotiation is often the major hurdle between choosing an agent or the DIY path due to the fear factor.  However, it isn’t as complicated as it seems.  By choosing to DIY you are able to be honest about your needs, and buyers can be honest about their own.  In our experience, vendors who have elected to DIY report the process is less combative than it is using agents as the go-between.  And when a rapport has been established between buyer and seller, it can make negotiation a pleasant and friendly experience.

If this isn’t for you, then there are services that can be offered where a professional can handle the negotiation component of the sale for you.

Overall, many first time DIY sellers advocate the experience as being a lot of fun.  Being complimented on your home as well as achieving an agreement on price provides a huge sense of accomplishment and joy.  Not to mention what can be done with the thousands of dollars saved in agent commissions.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

PREPARATION CHECKLIST FOR INVESTING

preparation-checklist-for-investing-sydney-prospera-finance-mortgage-broker-refinance-home-loans

Property investment is a lengthy and involved process. To ensure you have considered all that is required before making the big purchase, we’ve outlined the steps you need to take. 

Commit yourself

A property investment must be a long term commitment in order for it to be worthwhile, so the very first step is to evaluate your budget, constraints and future obligations.

“Consider your future as far ahead as you can,” says an MFAA broker. “You need to ensure that your ability, commitment and financial capability can withstand a minimum of five to ten years, as that’s what generally brings premium results.”

Seek Professional advice

The next step is to seek professional advice. It is your opportunity to ask as many questions needed to alleviate any uncertainty you may have.

“Whether you’re chasing a great rental return, maximum capital growth or tax effectiveness, speaking to a broker will help you make the correct property investment choice,” says the broker.

Having an accountant, financial planner, solicitor and property manager on your team will also assist in ensuring that you’ve made the right choice.

Personal advice

Talking to friends, family and acquaintances who have, or are currently considering investing, provides a fantastic world of advice, advises the finance broker.

“Anecdotal truths is least impacted by gain, so you can learn a lot from their advice and also from their mistakes.”

Paperwork

As well as proof of your current income, employment, debts and loans, gather any paperwork that helps support your character in the application. For example, if you have been a long-term tenant, get a 12 month tenancy legibility that proves your ability to make regular repayments. Before applying for a loan, minimise your current debt load, and if possible reduce the limit on any credit cards you have, as this is perceived by lenders as potential for debt.

It is also advisable to have a fully assessed pre-approval before you start your search, as this will allow you to make an offer once you’ve found a property you like.

Key things to consider

Rowlands recommends choosing a property based on whether or not you feel like you could live in it. “It’s not an emotional decision, it’s still a business decision. But you also have to adopt the mindset that you could be selling to an owner/occupier down the track, which could be an emotional purchase.”

If however you plan to rent the property, your decision should be based on what would appeal to the type of individual who wants to reside in the area.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

DO YOU NEED A FINANCE BROKER OR A FINANCIAL PLANNER?

do-you-need-a-finance-broker-or-a-financial-planner-sydney-prospera-finance-mortgage-broker-refinance-home-loans

When taking the plunge into the world of home loans and property investment, the challenge often lies in knowing which expert to approach for help. Brokers and financial planners, although similar in their professional outlook, cater to different financial endeavours.

Brokers that deal in home loans must be qualified and licensed loan advisers with in-depth knowledge of home loans and options suitable for a range of different financial situations. They negotiate with lenders to arrange loans and help manage the process through to settlement.

“When it comes to talking about a client’s debt structure or interest rates, or the best way to set up a loan, it’s really something that needs to be done by a mortgage broker who is qualified to give credit advice,” says the finance broker.

In contrast, financial planners assist with anticipating and managing longstanding financial outlook. They help sort through and select options for investment and insurance, with attention paid to retirement planning, estate planning and investment analysis.

“Planners take care of more of the long-term, wealth-creation strategy, as well as super and life insurance, and other sorts of wealth protection insurances,” the broker says.

A financial planner’s work is wide-reaching and important to your long-term financial health and stability. Options relating to loans and refinancing can only be recommended by qualified brokers.

There are some situations where it would be best to include both types of financial professional. For instance, if your broker is helping you refinance your loans in order to undertake a financial investment, a financial planner can step in to help you to assess the best investment option for you.

“There is rarely a time when I am dealing with a client, just on the loan side of things, where I’m not thinking about how it fits with what the financial planner is talking about,” the broker explains.

“In terms of whether the client’s choice is a viable investment strategy or whether it fits in with their long-term wealth goals, that’s something that we absolutely have to refer back to the planner to make sure that it fits in with their broader plan,” the broker adds.

The answer? It depends on your situation - for loans, see a broker, for investment advice, a financial planner. Of course, your broker can always refer you to a planner if you need one.

Contact Geoff to find out how he can help you secure property or commercial finance, and ask him to recommend a financial planner they trust.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

FINANCE BROKER OR BANK?

finance-broker-or-bank-sydney-prospera-finance-mortgage-broker-refinance-home-loans

When you’re looking for a home loan, you could go to a finance broker or to a bank. While a bank will only offer you its own products, a finance broker is an industry expert who will take the guesswork out of finding the mortgage product that suits you and your needs.

It’s understandable that finance brokers are now the number one choice for consumers who are seeking a home loan or to refinance an existing loan. Businesses are also engaging finance brokers to help them with their finance needs from car and equipment leasing to loans to help their businesses expand. 

What can a finance broker do for you? 

The leg-work

Finance Brokers already know the industry, the lenders, their products and their requirements, saving you a lot of time and energy on research. They will also put the time into finding out about your particular credit situation and have a wealth of experience to draw on to help you simplify it.

Translate industry jargon

Finance brokers are able to make sense of what loan documents and lenders are saying – put it into lay-person’s language, so to speak. 

Get you what you want

Advisers will determine your borrowing needs and fiscal ability, and choose the only an appropriate product to suit your requirements. 

Give you a broader choice

Finance brokers can offer a larger selection of loan products.  While a bank can only offer you its own products, finance brokers can help you choose from a selection of loans provided by different lenders. 

Help you compare apples, oranges and the whole fruit basket

Finance brokers have the knowledge and tools to compare often hundreds of products and you get a loan suitable for your circumstances and needs. 

Find you a good deal

Loan providers are always spruiking a special deal or two, and these could make a big difference to your repayments or success rate.  A finance broker will know which of the deals on the market at the moment will be appropriate for you. 

Act as your advocate

A good finance broker wants the best for you, the client.  They will be your cheer squad, middle-man, team player and coach throughout the process. 

They’re in it for the long haul

A finance broker won’t just love you and leave you – they will oversee and manage the loan’s progression right through to the end on your behalf.  By the way, ‘the end’ isn’t when you sign the documents and buy your property; you can expect your finance broker to keep track of you and your changing needs, helping you should you need to switch products or wish to purchase another property. 

The key is to choose a finance broker who is MFAA-accredited.  The Mortgage & Finance Association of Australia (MFAA) is the peak national body representing professional finance brokers across Australia, and all members must adhere to professional development standards and a stringent code of conduct.  

As an MFAA Approved Finance Broker, Geoff is much more than your average mortgage broker. 

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

WHAT TO BE AWARE OF WHEN BUYING OFF THE PLAN

what-to-be-aware-of-when-buying-off-the-plan-sydney-prospera-finance-mortgage-broker-refinance-home-loans

The rise of new apartment developments in our cities provides greater opportunities for potential home owners to buy off the plan. There are benefits to this, but also a number of things to be mindful of. We look at some of the things to consider when buying off the plan.

The benefits

A major benefit of purchasing off the plan is that you’ll own a brand new property. There are also financial benefits. For example, you’ll have the security of knowing how much you’ll pay for the property in the future, even if its value increases. Construction usually takes a year or two, so there’s time to save before you settle.

If you need to borrow money for the deposit, speak to your broker about how to best structure the purchase. Most home loan lenders won’t approve a loan for a long settlement period, but a broker can provide advice about what assurances you can get regarding the amount you may be able to borrow when it comes time to settle.

Depending on which state or territory you’re in, you may have access to stamp duty and tax concessions, or government grants. If you’re purchasing the property as an investment you may also be eligible for tax benefits. You should consult with your accountant for personal financial advice specific to your circumstances.

Things to look out for

Off-the-plan contracts try to cover future issues. Check that certain scenarios, such as construction delays or if you want to withdraw, are clearly addressed. Once the building is complete it might not meet your expectations. Speak to a legal advisor before signing the contract to avoid any surprises.

Find out whether the developer has taken out home warranty insurance. Depending on the relevant state or territory laws, builders may be required to include a certificate of insurance in the contract. Even if this isn’t the case, you can ask the developer for proof of insurance before you settle. Your broker or home loan lender may help with this as part of the lending process.

The property might be everything you dreamed of, but there’s always a risk the market may have changed by the time you settle. While you can’t avoid this, you should do some homework before you buy. For example, look at properties being built in the area to work out if there’s likely to be an oversupply. Some lenders may look at the value of your property, rather than what was paid for it when considering how much they will lend you. It’s worth speaking to your broker about how your property may be valued and what your home loan options are.

By exercising a little due diligence you can minimise the risks and reap the benefits of buying off the plan. 

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

TOWARDS 2019: WHAT NEXT FOR THE HOUSING MARKET?

towards-2019-what-next-for-the-housing-market-sydney-prospera-finance-mortgage-broker-refinance-home-loans

The Australian residential housing market has been highly variable this year, and we’ve seen some highlights as well as lowlights. We look ahead at what’s expected for the remainder of 2018 and beyond. 

It’s been a tale of mixed fortunes in the nation’s housing market over the past 12 months.  There’s been a downward slide in what were previously booming markets, as well as delight over growth in other areas.

Capital cities have mostly continued to soften – particularly Sydney, which has had a tough start to the year – yet some of our regional areas have reaped the rewards as homebuyers look further afield for value.

While houses have felt the pressure, apartment values in some areas have risen.

What’s more, whilst value declines were recorded for the more expensive half of the market, the most affordable end grew in value. It’s an interesting time, so we’ve taken a look at the key trends to be aware of in 2018.

The big winner: regional markets

Over the first quarter of the year, capital city values were down almost 1 percent compared to a 1.1 percent lift in regional dwelling values, according to NAB’s April 2018 Australian Housing Market Update.

The combined regional markets have been outperforming the capital cities since October last year, with the strongest annual growth rates recorded in the regions around Melbourne, Sydney and Canberra.

Victoria’s Geelong recorded the highest capital gains in the country over the past 12 months, with dwelling values up 10 percent, followed by NSW’s Southern Highlands and Shoalhaven region, which rose 9.5 percent.

The Capital region in south-east NSW including Queanbeyan rose 8.3 percent in the same period, as did the Newcastle and Lake Macquarie regions.

Driving the reduced demand in the cities is widely acknowledged by commentators nationally as recognition of opportunities in regional areas.

As NAB’s Housing Update team put it in the April Australian Housing Market Update, “it seems buyer demand has rippled away from the capitals… towards areas where housing is more affordable but also jobs, amenity and transport options are reasonably plentiful”.

Apartments gain attention

Interestingly, there has been a demand for units over houses, with unit values now outperforming house values in certain areas.

It’s a subtle difference when you look at the combined capital city figures over the March quarter – while house values are down one percent, units are down a more moderate 0.7 percent.

But those differences are more significant if you look at Sydney and Melbourne, where housing affordability pressures are clearer. As the report also shows, Sydney’s unit values are up 1.9 percent over the past 12 months while house values are down 3.8 percent.

Despite more positive results, the trend in Melbourne over the last 12 months is similar, with house values only rising 4.9 percent, compared to the 6.6 percent climb of units.

However, the trend is less pronounced or even reversed outside of Sydney and Melbourne.

The Brisbane housing market was flat over the first three months of the year, continuing the sedate pattern of a decade that’s seen dwelling values rise at an annual rate of just 0.9 percent.  Over the last 12 months, houses have performed better in value – with a rise of 1.8 percent compared to a fall of 1.4 percent for units. This is likely due to concerns of an apartment surplus in the city.

However there are predictions that this situation soon change, with unit construction having peaked in 2016. “Population growth is ramping up which will help support an improvement in the unit market’s performance,” according to NAB’s April update.

State by state: a breakdown

Perth is showing signs of improving conditions – a turnaround for a market that peaked in June 2014 and has since seen dwelling values fall 10.8 percent. The median dwelling value here is the lowest of the four largest capital cities. Dwelling values posted a rise in March (up 0.3 percent) but units continued to fall (down 2.2 percent over the quarter).

Hobart is the star performer and it’s a trend that’s expected to continue this year. Dwelling values were 1.7 percent higher in March to be 13 percent higher for the year. Adding more fuel to the fire is the plummeting listing numbers in the market – down 36 percent compared to a year ago – leading to rapid sales. “With low stock levels and high demand, Hobart is truly a sellers’ market” according to the update.

In Adelaide, growth has been flat but dwelling values are up 1.7 percent on 12 months ago and there are some positive signs. “Jobs growth has been ramping up across SA, which should help support a turnaround in migration that could buoy housing demand” the update predicts.

What’s next?

While there’s unlikely to be a major upturn in Sydney and Melbourne any time soon, signs point to a reasonably soft landing and stabilisation in other markets, according to the Housing Market Update.

Property experts are predicting further house price falls in NSW and Victoria but are more optimistic about Western Australia and Queensland.

NAB Chief Economist Alan Oster says stronger performances in some markets won’t make up for the decline in Sydney and Melbourne, predicting little improvement in the overall house price for the year. 

“Strong performance in Tasmania and to a lesser extent in regional areas, along with higher confidence in the West and Queensland, won’t offset the aggregate effects of lower prices in Sydney and Melbourne,” he says.

Please give me a call if I can be of any assistance.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

HOW A GUARANTOR CAN HELP YOU SECURE FINANCE

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When you’re desperately trying to save up a deposit for a home and just see the prices of property climbing and climbing, it’s difficult to remain patient. But there is another way: a guarantor can help.

If you don’t have a substantial deposit for a home loan, there are still a number of ways to obtain credit. These are known as family pledges and there are two types available to borrowers: service guarantees and security guarantees.

Service guarantees are less common that security guarantees, explains an MFAA-accredited finance broker, and they involve a family member guaranteeing all of the repayments on a loan, as well as being named on the property title.

“A drawback of this approach is that it usually means first home buyers are not entitled to any government grants,” the finance broker explains.

A more popular option is a security guarantee. Borrowers who have a limited deposit often use this approach. In this situation, a relative or friend (usually a borrower’s parent or parents) is prepared to use the equity in his or her own home to guarantee the deposit of the borrower.

For example, for a total loan amount of $600,000, in a security guarantor situation the borrower/s would take on the debt of 80 per cent of the value of their loan, which would be $480,000, in their own name/s.

The loan for the balance, $120,000, is then guaranteed in the names of the guarantor/s and borrower/s, limiting the guarantor’s liability while providing security for the lender, meaning that lender’s mortgage insurance is not necessary.

“This is a very popular way of first home buyers entering the property market,” the finance broker says. “It works well when borrowers don’t have a substantial deposit, but their parents own their own home. It’s a great option as long as the parents are comfortable with their child’s ability to pay back the loan.”

To find a solution that will help you own your own home sooner, speak to Geoff.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

SOLICITORS VERSUS CONVEYANCERS

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A conveyancer is a solicitor, but just deals with property, right? Wrong. The two are different, and it is important to have the right one on your team, in order to avoid paying too much while still getting the advice you need.

Buying property is one of the biggest decisions most of us will make in our lifetime – it’s something you want to get right.

Every Australian state and territory has different laws, forms, regulations and taxes associated with purchasing property, so having either a solicitor or a conveyancer will help the whole process run smoothly.

“A property purchase is one of the biggest financial commitments a person can make. It is therefore important to have professional advice about what you are buying,” says an MFAA broker.

“Solicitors and conveyancers are familiar with all the procedures and, while it may seem to be just paperwork, when you are not familiar with all the procedures it can be very time consuming.”

For a straightforward property purchase, a conveyancer can do the job. Their main responsibilities include giving advice and information about the sale of property, preparing documentation and conducting any settlement processes.

Although there is a licensing process for conveyancers, they do not have to be legal professionals. As a result, they are cheaper to hire. However, they can only provide information relating to property, so if you have additional legal questions, you might have to search elsewhere.

“Conveyancers must cease to act for a person as soon as the matter moves beyond conveyancing,” the broker explains. “When this happens, the conveyancer must refer you to a solicitor for advice.”

While conveyancers are limited to advising on your property purchase, solicitors can provide you with a wide range of legal advice in addition to your conveyancing needs, and may be necessary if your property transaction isn’t straightforward.

“If there are other matters that affect the transaction like family law, asset protection, asset structuring, tax law or estate planning, you will not be able to receive advice from a conveyancer,” the broker says. “If things get complicated with a conveyance you will need to get a solicitor’s advice.”

Solicitors are more expensive, but the investment may be worthwhile if you anticipate any legal issues – having this established relationship with a solicitor means you won’t have to scramble for one later.

Contact Geoff if you need a referral for a conveyancer or solicitor with experience and expertise.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

‘RENTVESTING’ - ENTER THE PROPERTY MARKET WITHOUT SACRIFICING YOUR CURRENT LIFESTYLE

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As property prices continue to rise, purchasing in a centrally-located or sought-after area is out of reach for the average working millennial.  Instead, many are opting to rent rather than buy as it means not having to compromise their inner city or beachside lifestyle.  But for those who are still eager to enter the market, there is a way to get the best of both worlds.

‘Rentvesting’ is the term coined for when you purchase a property for investment purposes in an affordable location and continue to live and rent in the area of your choice.  An example of how the market is evolving, it is a wealth creation strategy that is popular among the younger generation due to the flexibility it offers in comparison to being an owner-occupier.

“Millennials aren’t interested in purchasing a property in the outer suburbs and then having to commute into the CBD,” says an MFAA accredited finance broker. “Rentvesting allows your rental income to cover the mortgage expenses, so you can maintain a lifestyle with less cost.” 

For this strategy to work, you’ve got to be a good saver and there needs to be a focus on delayed gratification, advises the broker. “It’s all about living within your means.  Don’t spend big at the start while you’re building it up.  Step away from the mentality of negative gearing and tax minimisation and buy neutrally, or ideally, a positively geared property as this provides higher rental yields.”

“It’s still a foreign way of thinking,” says the finance broker. “In the past, the great Australian dream was to buy a home on a quarter acre block and then do everything you can to pay that down as fast as possible in the hope of living debt-free. ‘Rentvesting’ is quite the opposite.  It says we’re okay with good debt as long as we stick to our budget and keep using the money to invest further.  You’ve got to have an open mind and be comfortable with debt.”

To ensure you have the means to make ‘rentvesting’ work for you, give Geoff a call for advice on good debt and other strategies that will allow you to maintain your current lifestyle.
 

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE