Friday, September 25, 2009

On picking the right mortgage product for your needs


Consider this an object lesson in choosing your mortgages, folks. Make sure that you really DO know that you're going to be there long enough not to incur "deferred establishment fees" if you change banks early, and check what sort of legal and discharge fees they'll hit you with both within the first two or three years, and way down the track.


A couple of years ago, when I got on the road to financial freedom, all of this started with me at home, a new baby,  a deposit (inherited from Grandma), our landlord wanting his house back, the (ongoing) Sydney Rental Crisis, Too Much Debt, and Not Enough Income To Be Given a Mortgage (TM).

So, we did what any sensible soul in our situation would do when faced with certain homelessness in the rental market, and teamed up with Dad, who agreed to hold the mortgage in his name for five years until hubby finished his apprenticeship, thus preserving the First Homeowners Grant (which I had a hunch would go up...) and allowing us to build up a "deposit" in the form of equity from work we did on the property.

I guess this is also a lesson in having better faith in my ability to get us out of trouble. I seem to recall saying at the time: "There's no way we're going to be ABLE to break this mortgage inside three years, so it doesn't matter.", thinking it would take five...

Well, this is it: We got to transfer stage in less than two!

Today, debt-free (momentarily, but this was important!), and with my parents about to move overseas forever, I'm about to walk into the local conveyancing office and make the swap. Just in time to take advantage of the First Home Owners Grant Boost of $14,000 before the end of September. We're also twelve months away (hopefully) from moving back up the mountains and turning this into Yet Another Investment Property... so we have to get the grant on this one now-ish (6 month rule) anyway, or we'll never get it at all!

Yep, it's been tight manouvreing into position for this one!

The plan is still to borrow 90% of the minimum estimated value, which, after paying out the original mortgage held by Dad, and coupled with the FHOG Boost should leave us enough to 

a) clad, re-gutter and re-barge the outside of the house, and 
b) fix the kitchen, which has been the bane of our lives for two years already.
c) thereby adding about another $20K to the value of the property.

And while trying to figure out/minimise my costs yesterday, we discovered that we're going to have approximately $5000 (or about 1 year's worth of our built-up equity) swiped by the bank in "discharge fees", legal fees, and most insulting and biggest of all "deferred establishment fees" on the loan.

Lucky we're going to make it for the full $14K boost, or there'd have been nothing left! After all, the last thing the bank wants is to have the outside fall off the house just after we purchase...

But anyway, my point is that no matter what, or how, you go about getting your hands on your first property, make sure you're careful about break costs and deferred punishment fees for paying out your mortgage early. After all, if you find yourselves unhappy with your original lender as we are, you're unlikely to want to screw the nuts down with them to get a better deal second time around: you'll just move on.

I'll keep you all posted on how things go today.

Choose wisely, and good luck!

Tuesday, August 4, 2009

And half the country breathes a sigh of relief...

... as the RBA leaves interest rates at 3%. 

This is a breather for all homeowners, but especially for First Homeowners who have come into the market on the back of the First Homeowners Grant, many of whom, it seems, have overstretched their budgets in the rush to get on the bandwagon.

But honestly, in an economic climate where thousands are losing their jobs, it would be foolhardy at best for the RBA to raise rates as the unemployment rate is rising. It would tip the banks back over the edge, in some cases, and screw the economy even further.

Why? Because more families would be forced into foreclosure, in spite of recent changes to bank foreclosure practices.

Let's hope they keep things this way for at least another six months - or until the labour market, which pays for these mortgages, recovers enough to sustain it.


Wednesday, July 15, 2009

UK and US markets should look to Australia

I realised today that I've been very Australian-centric with my blog posts on here (with the exception of my comments about Kirsty Alsopp the other week), so figured it was high time to look further afield and start reading some of the OS news sites again.

What I read got me thinking.... the UK and US property markets would have a lot to learn from the Australian property market, which is one thing still propping us Aussies up, downunder in the midst of the financial crisis.

The UK market is having problems driving demand, and yet I know from research that you generally can't borrow more than five times your annual salary over there, which makes first homes average out at around GBP135,000 - far lower than the average here in Australia, even though the pound might as well be worth the same as the dollar in terms of prices (3 dollars or 3 quid for a cup of coffee).

Perhaps, to protect the building sector, they could look at providing more public housing in a tight rental market, as the Rudd Government is doing here. And perhaps they could boost interest in the market, building the Australian Dream into the UK Dream, by offering a similar scheme to the First Home Owners Grant.

The US may not need to offer such incentives to step into the market, given that it is massively oversupplied... but it could look at our banking system and make it so that mortgagees can't just walk away from properties that have gone backwards in value, as they have until now (and will continue to do into the future if nothing changes). This would, by default, prop up the market in the US for the future by making the American Dream home a less disposable asset.

Here in Australia, you're not allowed to walk away from your mortgage, scot-free... If the bank can't make the money back off the property, they can still come after you for the rest. Here, you're less likely to simply walk away and not return because your money and future really is tied up in your home. You'll stand and fight, and make more effort to keep it, especially with the rental rates running so high.

I realise that it's not going to be a catch-all solution. You can't solve a problem overnight. But it is food for thought. Perhaps the world needs to look at the best of each country's financial and mortgage system and cherry-pick until we find something that works?

We could learn a bit from them too (it could be argued...). Their interest rates are FAR better than ours!

Like travellers broadening their horizons... let's all learn from each other's strengths and weaknesses.

Wednesday, July 8, 2009

Now THAT's affordable housing...













Oh wow. Had to post about this cool house in Melbourne. It only cost the young lass owning it $20K to build!

I don't know the land value, but that's got to be positive cashflow.

Sassy, smart girl! I'll leave you to read the article for more info.

Wednesday, June 17, 2009

Something screwy at the Land Titles office?

Turns out there might be, in the case of our place.

Not satisfied with repeated deliveries of our mail to the block of 18 villas next door, and having every Tom, Dick, Harry, Auto-electrician and Foxtel installer (not to mention the cops and the odd debt collector as well), show up at our front door, hubby has taken the chance to complain to our local councillor when she showed up at our place to ask if there was anything she could do to help.

Well, she's managed to fix the signage problem on Block A, but it probably won't stop the neighbours giving their addresses without either the A suffix, or the unit number. Hey ho...

But checking the council maps on their computers shows another potential problem anyway: Our block is listed as A, and theirs as the number alone. Not the case on the title deeds, but confusing enough to make a case either for the renumbering of our street, or at least to make sure that the numbering mis-match doesn't occur at the Land Titles Office as well!

Will keep you posted, as it could be interesting if it turns out we bought a block of 18 villas instead of a beaten-up old house thanks to a mis-numbering on the deeds or the records!

Can anyone enlighten me on what the ramifications might be?

Saturday, June 6, 2009

Our Kirsty's being censored!


I confess, I'm a bit of a fan of Kirsty Allsopp. 

She's probably got a lot to do with why I write this blog, run my business, and maintain my property web site. Her, a design degree, a nasty situation in the Sydney rental property market, and the fact that I watch way too much of the Lifestyle Channel when I am stuck at home with our daughter. 

Oh, and being nuts about investment property :)

And, frankly, why shouldn't she be allowed to express herself with some of the clients she gets? I know I've said "Christ Almighty!" and worse (although probably out of earshot) with some of my own! "Shoot me now!" is a bit of a favourite...

Anyway, poor Kirsty, favourite presenter of the UK's Relocation Relocation, has been asked to keep a lid on it for the camera!

I hope they give her a punching bag off screen to make up for it...

Friday, May 8, 2009

Housing and the disappearing Australian Backyard


It's sad really, but this article in today's SMH shows a scary trend towards huge houses with little or no backyard.

I'm an advocate of the suburban back garden for landlords with family tenants. It's about keeping up the quality of life for yourself as a home-dweller, or the people whose homes you are responsible for... Giving them space to entertain outside if they wish, or to play in the backyard means you have happy tenants who stay in your property longer. At least that's the theory...

But it seems in the rush to sell bigger houses to home buyers in newer suburbs, builders are selling their buyers short for pointless "activity rooms" and the kids are locking themselves in their rooms to play computer games, while all the while our population gets fatter and less fit.

There should be a regulation in Australia. There needs to be a garden space of at least 75 square metres on every property being built and to hell with the builders and what they want to sell us.

I won't let my little daughter spend hours in front of the television as she gets older. Even now, at two, she comes out to play on her trike or her cubby/slide, or in her sandpit while I put out the washing. Or she runs around the garden while I throw a ball for her, and she comes with her Daddy and me to play frisbee for even 20 minutes down the road most weekends. I include her. I let her "help" with the gardening as we spruce up our battered old house, and look at flowers and insects with me, showing her carefully every little thing of interest that I find.

I was never much of an outdoors kid in the sporty sense... although Dad instilled in me a great interest in nature and we were always out together on weekends while Mum did her concerts. it's not really about being sporty. It's about getting out in the fresh air and taking an interest in things.

I've digressed a little from the property side of things into parenting, but it's made a difference in my life and the type of property I live in is really important to me as a result.

Dear readers, tenant or landlord: PLEASE give yourselves space to enjoy the outdoors! With places away from home being less safe for kids to roam, they're even more important now than they ever were in the past!

Friday, April 24, 2009

Bricks and Slaughter for First Home Buyers? My arse...

Maybe I am a little biased as both an investor and a first home buyer, but Jessica Irvine's comments in the Sydney Morning Herald Yesterday really made my blood boil.


"Last time I checked, a mortgage holder with a $300,000 mortgage pays $1400 a month in interest payments straight to the pockets of those same banking chiefs we all say we despise. Hate them, but you're paying their salary."


This, among other things, was part of an attack on Mr Rudd's government for encouraging activity in an otherwise flat/receding economy by helping First Home Buyers to get into the market with the First Home Owners Grant Boost.

Let me tell you something, Ms Irvine: If we had not made the decision to take the plunge and buy, we wouldn't even have a roof over our heads. Not for $1400 per month. Not for any money (that we didn't have at that point anyway).

Rents had skyrocketed so high in the three years since we leased our last property that we simply could not afford to rent a property to house our family and our home businesses. Nor, with me out of work at that point, could we even persuade a landlord to give us a lease. With a five-month-old and my husband just started a new job on a new career-path, we were considered too much of a risk!

I would much prefer to pay $1400 per month for a suitable property in a slightly crappier suburb, than the $2000 per month we would have had to find (and our peers have had to find) by staying in the rental market.

For a start, it now officially costs less to be buying than renting for us. We can also do as we please with the property and tailor it to our needs. The renovations have reaped us several rewards, including an increase in property equity and the ability to leverage it into an investment property. And now that we have lived in it for more than six months, whenever we are ready we can move on and keep this one as an investment property on a rental return that will see it positively geared.

So sure, some prices may have gone up in the Sydney market, but it's certainly reinvigorated the dead and receding market in Western Sydney, and provided some, like us, with the fantastic opportunity to secure their financial futures!

Tuesday, April 21, 2009

So the banks really are ripping us blind!

Here it is, in writing (as if we didn't know it already). The banks are crying poor and refusing to pass on the rate cuts, all the while, raking in the extra profits from the poor suckers who fixed their rates at the height of the interest rate mess.

Yes, their profit margin has gone from 0.8% to 0.95% in the last year alone.

So guys, what's the problem? An extra 0.15% not good enough for you?

Yeesh!

Tuesday, February 17, 2009

Insurance Tips for Multiple Properties

Great tip (summarised) from the Australian "Property Investor of the Year" Conny Torney (Your Investment Property Magazine, Feb 2009):

If you have more than one investment property, shop around and spread your landlords insurance policies across multiple insurers. This is because you may run into difficulties getting insurance later on, by having too many small claims with the one provider.

Nice one!

Tuesday, February 3, 2009

Wow, it's been a little while, but I'll tell you why:

I've been working on two new web sites to help out my readers in their investing efforts, and the work over Christmas has paid off.

I received my new business cards today, and by the end of the week, Property By Bess.com , my new consultancy, will be launched! So if you live in Sydney, and you need someone to look over your property (whether you be an investor or an owner-occupier who needs to sell for a better price), give me a call. I have several levels of report that you can order, tailored to your property style and needs. Last year, I got one of my clients a 60% rise in the rental return on her investment property! Can't guarantee that for everyone, but that's phenomenal, and it wasn't a particularly difficult job, either.

Another one to add to your bookmarks page is my much bigger site: Investing in Property Rentals. Very much a work in progress, this will take the more serious aspects of investing in rental property and look at them in depth, providing you with both information, and eventually access to providers who can help you in all aspects of your investing endeavours.

Stay tuned for an exciting year!