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Hello,
Summer =
has=20
arrived and it is a time when many of us are thinking =
about=20
installing a pool or extending the family home. =
To=20
achieve these goals your options are to sell your =
current=20
home, and buy elsewhere, or to renovate your existing =
home. We=20
discuss the pros and cons of each method in this =
edition. The=20
issue of whether or not to fix your interest rate is =
also=20
covered given the current speculation on interest rate =
movements. If you are interested in evaluating your =
options,=20
we look forward to recommending the most suitable =
finance=20
available to you.
If you decide to buy a =
property you=20
may be purchasing via the auction process. This can be =
a great=20
way to purchase but also a little daunting for those =
who have=20
not experienced it before. To ensure that you can bid =
with=20
confidence, please read our tips in this issue and =
contact us=20
so we can organise your finance prior to auction day.=20
If you have friends or family members who are =
buying a=20
property, and may find this newsletter of interest, =
please=20
forward it to them as we would be happy to assist them =
with=20
our professional advice.
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St Kilda Rd =
Towers
Level 4, 1=20
Queens Rd
Melbourne VIC 3004
| Tel: |
1300 667 694 |
| Fax: |
1300 667=20
=
594 | |
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Minimise=20
Interest Rise Exposure |
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Auctions=20
- The finance musts! |
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Sub=20
Prime crisis - Is it likely in =
Australia? |
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![3D""=20](3D"http://www.powerport.com.au/images/nport_images/newsletter_images/=) |
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Renovate or Sell/Buy
If your present home is where you want to be, meaning it =
is a=20
great neighbourhood, amenities are just right, transport is =
handy=20
and the family and kids love the school and friends, but you =
need=20
more room, you have a tough decision to make.
There =
are a=20
number of vital facts you must consider:
- What is the cost of renovation to meet your current as =
well as=20
future needs? Don't just assess your immediate needs as =
you are=20
likely to want more in the future. Also add 10% to 15% to =
quotes=20
as you will want to change as you renovate?
- Is this expenditure going to over capitalise your =
property,=20
meaning will you be able to sell it in the future and =
recover your=20
costs?
- When looking at purchasing as an alternative, allow =
for costs=20
you will not recover such as commission on the sale of =
your=20
property, Stamp duty and legal fees and cost of moving. =
These add=20
up.
- How much disruption will the renovation produce? Will =
you need=20
to rent somewhere while the renovation takes place?
- How will you match your financing between selling your =
place=20
and purchasing another? Will you need additional funding =
until=20
your house is sold?
- Last but not least, budget for new household items. =
Don't=20
believe that all your existing furniture and appliances =
will=20
simply be used in your new home. Never =
happens.
There=20
are some very exciting loan solutions available and we can =
seek out=20
the best financing alternatives to suit your needs.
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Minimise Interest Rise Exposure
Variable or fixed: Which is best for you?
For =
most of=20
this year commentators have been saying there is likely to =
be=20
another rate rise by Christmas. A few months ago they were=20
predicting this as if it were an absolute certainty. Just =
recently=20
however many have changed their tone and are now saying that =
the=20
Reserve Bank may leave interest rates on hold or even drop =
them.=20
Interestingly, one of the unexpected consequences of the sub =
prime=20
crisis in the USA is that it may create a downward pressure =
for the=20
Reserve Bank when setting Australian rates.
In the =
current=20
uncertainty about the future direction of rates, it may be=20
worthwhile for you to review if your existing loan is the =
best one=20
to minimise your exposure.
Interest on a home loan =
can be=20
charged at the standard variable rate and the second is a =
fixed=20
rate.
Under the standard variable arrangement the =
rate can=20
vary up or down according to decisions of the Reserve Bank. =
When the=20
Reserve Bank lifts the overnight cash rate your home loan =
rate will=20
also lift. With a standard variable loan your rate will also =
drop=20
when the cash rate drops.
With a fixed rate the =
interest rate=20
is locked-in for an agreed term. Terms of 1, 2, 3, 4, 5, 7, =
10, 15=20
years are common. This lock-in period is guaranteed and your =
interest rate remains 'fixed' for the duration of the term =
despite=20
what the Reserve Bank does. Fixing not only means that the =
rate is=20
fixed, it also means that the term is fixed. Hence you are =
committed=20
to the arrangement for 1, 2, 3 etc, years.
There are =
however=20
many new variations to the old variable vs. fixed options. =
You can=20
arrange part of your loan on a fixed term and rate, part on =
variable=20
and a whole lot of various combinations to minimise your =
exposure=20
and minimise your repayments and costs.
Please =
contact us if=20
you would like to review your possible exposure to rise or =
falls in=20
the Reserve's cash rate. We can work through the benefits of =
spreading your loan between fixed and variable and explore =
other=20
alternatives and lender offerings.
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Book Review
Dream=20
Backyards, From Planters to Decks, Over 30 Projects to =
Create a=20
Beautiful Outdoor Living Space
Author: =
Family=20
Handyman Magazine
Backyards are important to all of =
us for=20
various reasons including a place for the kids to play =
safely and a=20
place for us adults to play and entertain or simply to =
unwind and=20
have a glass or two of red.
Because of the amount of =
time we=20
spend in our backyard, it is a very important part of a =
buyers=20
scrutiny of your home. Often buying decisions are made =
because of=20
the layout of a backyard.
This book provides designs, =
pictures and ideas from water gardens to decks to patios and =
paths.=20
"Dream Backyards"--from the editors of "The Family Handyman" =
magazine--presents stylistic concepts and hundreds of =
full-color=20
photos--plus at-a-glance information on skill levels, tools =
needed,=20
and approximate project costs.
It is a recommended =
book to=20
buy whether if you are thinking about redesigning your =
backyard for=20
yourself or as an investment in optimising the house sales=20
value.
Price: $49.95
Publisher: Reader's Digest=20
Association
Source:=20
http://www.theaustralian.seekbooks.com.au
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Auctions - The finance musts!
From time to time we are asked how people can make sure =
that=20
finance will be available if they make a successful bid at =
an=20
auction.
When the hammer goes down on the final =
bid at=20
an auction, the offer is final and there is no cooling off =
period.=20
This contrasts with the situation where you purchase a =
property=20
'through the Real Estate Agent's window' because the offer =
in this=20
type of purchase can be made 'subject to finance' and it =
also=20
includes a cooling off period (except in WA). In an auction =
you=20
cannot afford to bid more at than you can borrow. It is good =
to=20
attend an auction in the security that you know your =
borrowing=20
limits.
The process of acquiring the comfort of =
knowing how=20
much you can borrow is called pre-approval and we can help =
you with=20
this.
At its simplest level pre-approval means the =
lender=20
will assess your income and calculate the size of loan you =
can=20
service. The lender will issue you with a conditional =
approval to=20
borrow that amount of money subject to the valuation. We =
recommend=20
you go one step further and have the property valued by your =
lender=20
prior to the auction to obtain your unconditional approval. =
This=20
will involve a small cost whether or not you are successful =
at=20
auction but we believe it is worth it for the peace of mind. =
With these two aspects of your purchase guaranteed, =
you can=20
then attend the auction and bid to your limit with a =
confidence that=20
the lender will advance you the amount you require to =
purchase the=20
asset.
Pre-approval means that you can be sure the =
finance=20
package will be there when you need it.
A condition =
of the=20
auction process is that a deposit - usually 10% of the =
successful=20
bid - is payable at the completion of the auction. As this =
amount=20
can be as much as $50,000 it is essential that you have =
pre-arranged=20
this finance and this can all be a part of the pre-approval =
process.=20
We are well experienced in arranging pre-approvals =
for=20
prospective buyers attending auctions. If you are =
considering buying=20
at an auction, please call us so we can help you with a=20
pre-approval.
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Did you know?
In =
most=20
auctions a non-refundable deposit is payable at the fall of =
the=20
hammer. This is usually 10% of the full bid.
The =
meaning of=20
the term non-refundable is that if you fail to go through =
with the=20
remainder of the purchase, you will forfeit the deposit. In =
the=20
purchase of an ordinary suburban home the deposit may be =
from=20
$30,000 to over $100,000.
The common settlement terms =
in=20
auction contracts vary between 42 days and 65 days. It is =
important=20
to read the contract prior to the auction to ensure you can =
arrange=20
finance within the settlement period.
If you fail to =
settle=20
the full purchase price by the end of the time period, the =
vendor=20
usually have options which may result in loss of your =
deposit or he=20
may proceed with another sale and attempt to recover any =
losses he=20
may incur if he sells the property for less than you bid=20
for.
To ensure your pre-approval finance is processed =
as a=20
priority, please contact us early if you are looking at =
purchase at=20
auction.
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Sub Prime crisis - Is it likely in Australia?
RBA concludes a low risk of sub prime meltdown in=20
AustraliaThe subject of the sub prime credit crisis in =
the=20
United States is coming up regularly on the evening news and =
some=20
television reporters are implying terrible flow-on effects =
in=20
Australia. Many home owners and property investors are =
wondering how=20
the sub prime crisis may affect their financial=20
arrangements.
Briefly, the sub prime crisis has =
arisen in the=20
United States because the lending practices for home and =
investment=20
property purchases were lax when compared with Australian =
standards.=20
The inevitable result of this is a far higher level of =
defaults in=20
the United States and this has recently peaked causing a =
meltdown in=20
some of the lenders working in this market.
It is =
unlikely=20
however that this meltdown will be mirrored in Australia. In =
the=20
United States about 15% of all housing loans are within the =
sub=20
prime market. The direct equivalent in Australia is that =
only about=20
1% of all housing loans are within what could be considered =
the sub=20
prime market.
The total number of defaults in =
Australia is=20
unlikely to get anywhere near the number of defaults that =
are=20
occurring in the United States. In turn this means that =
there is=20
unlikely to be a vast rush of defaulting houses come onto =
the market=20
with the effect of crashing the property market in Australia =
and=20
creating problems for lenders.
The Reserve Bank of =
Australia=20
issued a financial stability report in September of this =
year in=20
which it concluded that the financial stability of the =
Australian=20
economy was extremely strong.
The RBA considers that =
"the=20
Australian banking system remains highly profitable and is =
well=20
capitalised", the Australian economy continues to "grow at a =
strong=20
pace" and that household and business balance sheets are "in =
good=20
shape".
The RBA concludes that Australian banks have =
"very=20
limited exposure" to the US sub prime market, the Australian =
sub=20
prime housing sector is "very small", that there are low =
arrears and=20
that households are benefiting "from strong income growth =
and low=20
unemployment, with household wealth rising solidly =
recently."
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Our Partners
Red Rock =
Mortgage=20
Group is a Full Corporate Member of the Finance Brokers =
Association=20
of Australia.
All members are bound by a strict code =
of=20
ethics to ensure the highest levels of service, integrity =
and=20
professionalism. |
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About Us
Red Rock =
Mortgages=20
specialise in mortgage finance for property Investors &=20
Developers. Whether you're a novice or an experienced =
investor=20
looking for a flexible finance solution to create wealth. =
Red Rock=20
offers a mortgage to suit your needs.
Our aim is to =
assist=20
investors in creating wealth through property by utilising=20
innovative and flexible mortgage finance solutions. =
Our=20
boutique approach, experience and expertise means you'll be =
able to=20
source the right finance facility to build a diverse =
property=20
portfolio. We not only look at investment finance =
strategically, but=20
also understand the needs and requirements for a successful =
property=20
investor.
Red Rock Mortgages provides you with =
choice &=20
flexibility from a diverse lender panel including the major =
banks=20
and other lenders. In addition our own unique range of =
lending=20
products can provide you with cutting edge innovation and =
additional=20
leverage where others cannot.
As investors and self =
employed=20
business people we understand the needs of self employed =
borrowers=20
and property investors. You can be assured of receiving =
expert=20
advice and prompt assistance, with the added comfort of =
knowing we=20
are both speaking the 'same language'.
For =
professional=20
intelligent finance advice, contact us today.
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Disclaimer: =
This=20
newsletter is intended to provide general news and =
information only.=20
Readers should rely on their own enquiries before making any =
decisions regarding their own interests. Please do not rely =
on any=20
part of this newsletter as a substitute for specific legal =
or=20
financial advice. All material is copyright 2007. =
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