bad credit

6 Things Every Credit Card Owner Should Know

6 Credit Card Rules to Always Follow

Credit cards make purchases and paying your bills easier. Using a credit card is also a good way to boost your credit score. However, failing to properly manage your credit cards can lead to a lot of unnecessary expenses.

If you’re tempted to buy things you can’t really afford just because you can charge them on your cards, it will benefit you to leave them at home when you go shopping. When you have an emergency, rely on an emergency fund to avoid charging unplanned expenses on your cards.

Selecting a credit card that’s right for you is also important. This can be difficult, since the cards you qualify for are limited by your credit score. Compare credit card limits, rates, and other fees to figure out which card will work the best for your circumstances.

Follow these tips to avoid spending a lot on fees and interest while boosting your credit score:

 

  1. Pay your bill on time, and pay more than the minimum. Not only will you avoid late fees with this strategy, but you’ll also pay off your balance quicker, thus saving money on interest, too. 
  • For example, if you have a $500 balance on a card with a 15% Interest Rate, you would end up paying $595 over two years if you make the minimum payments of $20/month.
  • However, if you make payments of $50/month instead of the $20 minimum payment, you would end up spending a total of $528 to pay off your balance in a little less than a year.
  • Be consistent with your payments. Missing a payment or paying less than the minimum may negatively impact your credit score resulting in bad credit.
  1. Keep your balance as low as possible. Ideally, your balance should be less than 30% of your available credit limit.
  • Avoid maxing out your credit card or making large purchases unless you plan on making a significantly larger payment to cover these expenses.
  • Consider applying for a credit limit increase if you cannot pay off enough on your card to stay around the 30% mark.
  1. Read the fine print on rewards cards. Credit card providers typically charge higher rates and fees to compensate for the cash back and other rewards. 
  • The best strategy for using a credit card with rewards is to make enough purchases to qualify for the rewards, but then pay off your balance in full every month to avoid paying interest.
  1. Keep it simple. Owning too many credit cards can make managing your accounts difficult. You’ll be more likely to miss a payment.
  1. Be careful with balance transfers. This can sound like a good option if you qualify for a credit card with lower fees and rate. However, some credit card companies will charge you a transfer fee, which is usually a percentage of the debt you are transferring. Paying 3% of the amount you’re transferring to get a slightly lower rate might not save you money.
  1. Avoid cash advances on your credit cards. A cash advance can be a tempting option because this cash is very easy to get, but you’ll have to pay a fee and will have to make larger monthly payments to compensate for this charge. Cash advances often have a higher rate of interest as well.

These tips will help you stay on the right track with your credit cards. Keep in mind that you can easily avoid fees and spend less on interest by being responsible and planning your expenses and payments in advance.

Shop around for a better credit card every two years or so. You will qualify for better products as your credit score improves from following these strategies.

If you are looking to consolidate debt, or discuss any of your finance options, one of our expert lending specialists is here to help you.  Call or email us today!

bad credit, credit score, credit card

What Is Bad Credit?

When it comes to impaired credit, there are many kinds; the main ones include:

  • Bad Credit History – Negative marks like bankruptcy, defaults, court writs, judgments and an excessive amount of credit enquiries could lead to mistrust in your loan application…

home loans australia

100% Non-Resident Home Loans

Non-Resident Guarantor Home Loans - How to borrow 100% of the purchase price

Non-Resident Guarantor Home Loans

Despite what you may have heard, it is possible to obtain a non resident home loan that finances 100% of your purchase price even if you are an Australian non-resident.

Loans of this kind are called Non-Resident Guarantor Home Loans, and if you are eligible for them, then you won’t have to pay a single penny as deposit. Read on for more information:-

What is a Guarantor Home Loan?

Guarantor non resident home loans are loans where relatives of the borrower (most commonly parents) agree to be the guarantor for 20% of the purchase price. They can either mortgage their home or pay cash (also called a term deposit) for the same.

Who is a Non-resident? (*only for the purposes of this home loan article)

A non-resident can be either of the following:-

  1. A foreign national living in Australia on a temporary visa, like the 457 work visa.
  2. An Australian citizen living and working overseas (Australian expats).

What is the eligibility criteria for a non-resident guarantor home loan?

The following criteria need to be satisfied to be eligible for a non-resident guarantor home loan:-

  1. A good credit history with either no credit defaults or defaults that have already been paid off.
  2. Good employment history outside of the probation period. And if under probation, then the individual must have former experience in a similar position.
  3. Assets greater than liabilities, also known as Positive Asset Position.
  4. Income that is sufficient to cover the repayment of the loan.
  5. Both the property being purchased and the guarantor’s property must be regular residential houses or units.

Who is an eligible guarantor?

The following candidate(s) are eligible as guarantors:-

  1. Immediate family members such as parents or siblings. Cousins and friends are not eligible.
  2. Guarantor has their own property in Australia and has sufficient equity in the property.
  3. Guarantor has a clean credit history.
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non resident loans

Australian Expat Non-Resident Home Loans

Australian Expat Home Loans

Any Australian citizen who resides and works overseas is called an Australian expat. If you are one, then you may be familiar with a popular belief that it is extremely difficult for non-residents to get home loans in Australia.

Don’t get discouraged by this myth!

In reality you have many good options if you are an expat and wish to apply for a home loan.  

How does it Work?

As an expat, you may be considered a non-resident, but there are many loans available in the market that give you the same benefits as a local resident. To determine if you qualify for any of these you need to first check the eligibility criteria:-

  • Different lending institutions have different criteria depending on the country of your current residency.
  • Your financial position must be sufficient to cover the cost of repayment and buffer fluctuations in the currency exchange rate.
  • Job stability is another criteria, and it is considered highly favorable if you have worked for your current employer for at least two years.
  • A clean Australian credit history is important for loan approval. Overseas credit is usually not checked, but some lenders may ask for such credit reports.
  • And you will need bank statements that show your savings and financial assets, hence proving that you are good with money.

Other than this it helps if you have a pre-approval from a good broker. Not only does it improve your chances of finding the right loan product for your situation, but it also gives you more confidence throughout the procedure as you have someone to fall back upon to clear doubts and explain complex financial structures.

Once all this is done, you should go ahead and select a property of your choice. For this make sure you fly back to Australia and personally check the land and credentials of the real estate agent. In fact, it is best if you do not tell the agent about your expat status. Many can take advantage of this fact and present an inflated price.

Beyond that it is not necessary for you to be in Australia. Fax, phone and internet are routinely used these days for completing all the legalities before a loan is sanctioned and received, which usually takes somewhere between 30 to 45 days.

Once that is done and the property is officially yours, you can either ask local family members to help you maintain it and find good tenants, or you can contact a real estate agent to improve the value of your investment.

Non-Resident

In most cases non-resident loans are eligible for all of the same loan features as Australian citizens – some of these include:

  • Interest only options up to 15 years
  • 100% Offset
  • Internet & Phone Banking
  • Professional Pack Rate Discounts
  • Construction Loans
  • Fixed rate loan options
  • Extra repayments
  • Redraw
  • Max Loan term 30 years
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interest rates

How Do I Save Money on My Mortgage? (It’s not all about Interest Rates!)

save money

If you are looking at buying a home or refinancing your existing home, you have probably been having a lot of conversations about interest rates. If you enjoy talking about interest rates, fine, go ahead. It’s like talking about the weather: it won’t make any difference, but it gives you something to talk about.

The simple truth is that the variance in interest rates on standard home loans from one lending institution to another is so small that it will not make a big difference in the total cost of your mortgage.

As a matter of fact, the average difference is only about .06%, which is a saving of $240 per year on a $400,000 mortgage.

With all the emphasis lately on credit scores and credit ratings, it is surprising that a lot of people still believe that shopping around for the best rate will make such a big difference. Credit scores are based on a consumer’s credit worthiness: whether you pay your bills on time, if you have ever defaulted on a loan, whether other lenders have been willing to lend to you, etc.  So apart from a few points difference, all the banks are going to quote the same or very similar rate for one applicant if they present the same as another. Lets’ look at that interest rate savings of $240 per year. If you look around for more than a day, you are paying yourself only $10 per hour for your time.

The only way to have a real savings on your mortgage is to have an overall mortgage strategy. There are many types of mortgages being offered, and the combinations of benchmark rate used, terms of payment and duration of loan can have a great overall impact on the loan over time. This is what is more important to look at. Finding the mortgage expert who will discuss more than just the interest rate, but instead will understand the economic markets and examine your financial situation and longer term plans will achieve much more savings on your mortgage. Choosing the right mortgage strategy can save you tens of thousands of dollars, as compared to the $240 cited above that can be saved on a lower interest rate.

How can you find out the best strategy? Working with a mortgage consultant who understands the economic markets, who works closely with you, who understands your needs and particular circumstances, and who combines this knowledge and information with the best rates available is the secret to finding the right mortgage strategy. Understanding this concept can save you tens of thousands of dollars in home loan costs, rather than tens of dollars.

Not convinced? You can get more details and understand how this is true by having a brief, no obligation, chat with one of our lending specialists today.

commercial mortgage lenders

Click here to request a free no obligation quote from one of our specialist lending advisers to see just how much you could be saving on your loan!

low doc home loans, low doc loans, low doc loan

Low Doc Loans – What Lenders Look For

low doc home loans, low doc loans, low doc loan

Low Doc Loans are an ideal lending solution for people who are self-employed and struggling to secure traditional finance. If you are in the market for a Low Doc Loan, there are several key criteria that lenders look at when assessing your application for approval.

Below is a brief list of these key criteria.

Deposit

As a general rule a minimum 20 per cent deposit is required to secure a low doc loan for residential purposes.  However at Sherlock we have options for low doc loans up to 85% even 90%  – meaning the minimum required would reduce to a 15% or 10% deposit.

Self-employed history

Your ABN is a key component that lenders look at in determining how long you have been in self-employment. Normally a minimum 12-month ABN is required, however the longer you have been self-employed the more agreeable the lender will be.

Assets

If you can show that you hold significant equity in assets that you hold, lenders tend to view your low doc loan application more favourably.

Existing loan repayment history

Lenders will often ask to look at statements on other loan facilities you currently hold to ensure you have a consistent repayment history.

Maximum loan amount/exposure

Low doc home loan lenders will limit the amount of overall lending they will advance to a low doc borrower.  As a general rule this limit is $1 million.  However at Sherlock Holmes we have access to some niche low doc loans that will advance funds in excess of this minimum.

Contact the team at Sherlock Holmes Lending Solutions to find out more about low doc loans and how the options available can be tailored to your needs.

Flipping Real Estate – Calculating Costs

I know, I know – how obnoxiously American a term – ‘flipping’ real estate! However it works – and whatever we chose to call it Down Under – we still do it (and probably better than the Yanks anyway 😉 )

If you’ve been in the real estate investing business, or more specifically been flipping real estate, for more than a few days, you’ve inevitably gotten an email that reads something like this:

“Investor’s Dream. This property will go QUICK.

– Property Address: 1234 Main Street

– Asking Price: $400,000 (Add or subtract zeros!)

– After Repair Value: $500,000

– Repairs: $25,000

– Profit: $75,000

– Details: Needs paint, carpet, tile, new kitchen, update bathroom, some roof damage.

STOP! Before you read on… Take a guess at what you think the “real” profit’s going to be on this real estate investment…

If you haven’t ever gotten an email or fax broadcast like this, then rest assured, you will! I’m about to probably tick off all of the late night infomercials and pitchmen out there! Sure, I understand that when you’ve got 30 minutes (or 90 minutes, for that matter), that you’ve got to sell what’s sexy… not what’s real!

Now it’s my turn to expose the real deal on real estate investing! This goes for flipping real estate itself (i.e. properties) or simply flipping the contract (also known as assigning the contract). When you’re flipping real estate, you need to be able to calculate the “real” bottom line and if your assigning the contract, you need to know your numbers so you don’t get blacklisted by investors! This one piece of information will keep you from getting into trouble because of any “real estate bubble”!

Purchase Costs

Here goes… Have you EVER purchased and sold a piece of real estate for FREE? If you’re not sure what the answer is… It’s an emphatic NO… You are going to have costs to buy, costs to hold and costs to sell. This holds true even if you are buying a property for all cash. (Think stamp duty, titles office fees, conveyancing  fees, etc.)

If you’re not getting a mortgage, your purchase costs are obviously much lower, but nonetheless, there are costs associated with any real estate transaction. Plus, more than likely, if you’re relatively new, you’re probably not paying all cash for property anyway. You’re probably going to be using a home loan/mortgage for your initial real estate investing financing! (As a general rule I expect you would be using loans and mortgages for most if not all of your investments in real estate).

For a quick calculation, you can estimate anywhere between 3% – 5% for settlement costs to just acquire the property. That’s 3%-5% of the purchase price.

Holding Costs

How much is it going to cost you each and every day to own this piece of real estate? See, if you’re making money in real estate, you’d better believe that there are a lot of other people that are going to expect to get paid and they get paid in the form of mortgage interest, council rates, utilities (unless it is rented), property insurance, etc. Each of these is an expense each and every day that you own the property. Here’s an example… A home loan on a bread and butter type piece of real estate might run you 5%. Let’s say you got the property for $400,000. Every month, you are paying $1,666 in interest alone. Let’s say that taxes and insurance are another $200/month and then utilities at $200. Right there, the property is costing you $2066/month – or roughly $68/day. See, why it’s important to know not only your holding costs on a real estate investment, but also how long it’s going to be on the market before you can flip the property.

Selling Costs

Here’s the third part of the real estate investing puzzle. When you want to turn around and sell this piece of real estate, it’s going to cost you yet again! Are you going to use a real estate agent and pay a commission or 1.5-3.5% or even more? On $500,000, that’s anywhere from $7,500 to $17,500 chopped of the top.

If you can remember this… and apply what you’ve just learned to each and every real estate deal that you do, you’ll be safe flipping real estate in any market. You see, if it’s a hot market, you can calculate less time for holding cost. But, in a slower market, make your offer based on 6 months or 9 months of holding costs. It’s really simple mathematics! And real estate really is a numbers game…

5 House Flipping Do’s

1) Do put everything to pen and paper and plan it out carefully before you begin.

2) Do establish a budget for the entire project.

3) Do have an inspection.

4) Do know the neighbourhood and plan your flip according to the needs of the area rather than your personal tastes and needs in a home.

5) Do remember that you are in the market to make money not waste money when it comes to establishing an asking price for the property.

5 House Flipping Don’ts

1) Don’t forget to check out the neighbourhood before you buy.

2) Don’t blow your budget without just cause. Your budget is what you used to determine whether or not the house would be a profitable venture.

3) Don’t forget to set daily goals and hold yourself accountable to those goals.

4) Don’t neglect the exterior. Curbside appeal is what brings buyers into the property.

5) Don’t spend money you don’t need to spend. While it would be great to put in granite countertops and gourmet kitchens into every home it isn’t always practical.

The Importance of Mortgage Protection Insurance

 

Purchasing a home is a major expense that requires a significant and long term financial commitment. When you initially apply for a mortgage, you are approved for loan funding based on your financial status at the time of application. Most people do not expect that their financial situations will get worse over time, but in some cases that is exactly what happens. Whether through the loss of employment or the death of a family member, it is an unfortunate fact that many people find themselves in situations that keep them from being able to keep up with their home loan payments.

Importance of Mortgage Protection Insurance

For many families, making mortgage payments would become difficult or even impossible in the event of the death of one or more members of the household. Before investing in a home, it is important to stop and think about how the house payments could be made if a major source of household income were to become permanently unavailable as the result of an unanticipated death.

While no one wants to think that their family will ever face a worst case scenario, it’s necessary to make contingency plans for every possible situation. Mortgages are such a large expense that it is important to consider how one’s family would be able to avoid the threat of foreclosure, in addition to losing a loved one, if such a situation were to arise. Fortunately, it is possible to protect your family from having to face the possibility of such a situation by investing in mortgage protection insurance.

Simply put, mortgage protection insurance is a life insurance policy that will pay off your mortgage following the death of one or more covered individuals. The primary purpose of this type of coverage is to reduce the financial burden placed on surviving family members following the death of a loved one. Homeowners who invest in this type of insurance coverage are making an important commitment to their families. This type of coverage can ensure that one’s family will never be forced out of its home as the result of income loss following the death of a family member.

Who Needs Mortgage Protection Insurance?

In single income households, or families in which one partner earns the majority of the money, many people think that the only covered life needs to be that of the primary breadwinner. However, it is likely that the death of a non-working spouse, or one who works part time, can also have a serious impact on a family’s ability to continue to afford to make mortgage loan payments.

Many people make the mistake of focusing only on income loss following death. They neglect to think about the expenses that will increase if either adult household member is no longer around. For example, if the non-working spouse is staying home with young children, the family does not have to pay for full-time child care. However, if that parent were no longer there, the working parent would have to pay for child care, which is a significant expense, in order to continue working.

Where to Get Mortgage Protection Insurance

There are a number of different options for making sure that your family remains financially able to stay in its home following the unexpected death of one or more members of the household. Many banks and other lenders offer mortgage protection insurance policies that can be purchased at the time you settle on your home loan.

These types of policies are specific to one’s mortgage, and proceeds are disbursed to pay off the remaining loan balance upon the occurrence of a covered event. It is also possible that the company who carries your homeowners’ coverage offers a mortgage protection policy. Payments for these types of polices can generally be included in the ongoing payments for homeowners insurance that are included in your monthly loan payment.

No matter which coverage option you select, the important thing is to make sure that your family is protected even under the worst possible circumstances. When you think about the alternative, the cost of mortgage protection insurance really seems to be quite small. When you purchase mortgage insurance protection, you are investing in peace of mind for yourself and for your family.

At Sherlock we have a solid partnership with a major Mortgage Protection Insurance Provider and can assist you with securing a policy today. Contact the team at Sherlock Holmes Lending Solutions to discuss your mortgage protection insurance options.

  Purchasing a home is a major expense that requires a significant and long term financial commitment. When you initially apply for a mortgage, you are approved for loan funding based on your financial status at the time of application. Most people do not expect that their financial situations will get worse over time, but…

Seven Steps to Eliminate Credit Card Debt

Here are Seven common sense guidelines to eliminate credit card debt:

1) DO make a budget listing all your fixed expenses. Rent or mortgage, car insurance, car payments, mobile phones, utilities, day care, fixed loans, etc. Then try to estimate a reasonable budget for discretionary items like food, entertainment, clothes, etc.

2) DO make a second list of all your outstanding balances and sort by balance, minimum payment, and interest charges if you have multiple credit card debts.

You may think the wisest thing to do is paying off the credit card with the highest interest rate. However, there are 2 preferred methods to follow.

First, you should reduce the number of credit cards. Pay off the smallest balance first with larger payments until the number of credit cards you have in debt is down to one. Your ultimate goal is zero, or when you can pay your monthly balance in full every month.

The other strategy is to pay the balance on any card exceeding 50 percent of your credit limit because balances above this level may affect your credit score.

3) DO use cash or a debit card linked to your bank account. You can’t spend what you don’t have.

4) DO look for extra income. Most likely your rent or mortgage is your biggest expense, so consider a roommate if possible. If you like your occasional privacy, consider an International student for shorter periods of time.

5) DO look for the little things that add up in your expenses. Maybe change your phone plan if you are constantly going over the monthly minutes? How about that $3.50 latte or cappuccino every work day? That’s almost $1,000 a year!

6) DON’T sign up with a new credit card with a 0% Interest Rate for the first 6 months.

You probably receive a lot of junk mail enticing you to sign up with a new credit card with a 0% Interest Rate for the first 6 months before it jumps to 18% or even higher. Then 6 months later you would transfer your huge balance to another piece of plastic. Unfortunately, the biggest risk is they are simply giving you more credit to spend, and the number of cards and liability increases.

Unless you are extremely disciplined, this doesn’t really work as you end up bigger and deeper in the hole! Reducing the number of credit cards is the goal.

7) DO consider refinancing your home (if you have one) and consolidating all your debts into one

Logically, a 4.50-5.50% home loan is a lot less than 18% on a credit card. You can’t spend what you don’t have. You will be asked to have all your cards cut up (except maybe one with a small credit limit) and you have reduced the number of credit cards. You are now paying back that debt at far lower interest rates – often we find that the overall new monthly mortgage payment incorporating the consolidated debts is lower or at least equal to what you were previously paying out across several loans (credit cards included). Plus – the temptation has now been removed as you no longer have the credit cards!

Melanie Burns

Here are Seven common sense guidelines to eliminate credit card debt: 1) DO make a budget listing all your fixed expenses. Rent or mortgage, car insurance, car payments, mobile phones, utilities, day care, fixed loans, etc. Then try to estimate a reasonable budget for discretionary items like food, entertainment, clothes, etc. 2) DO make a…

If Real Estate Investment Is So Great, Why Doesn’t Everyone Do It?

Oh, that’s an easy one. I can answer that in one word. FEAR.

Real Estate investment is a great way to change just about everything in your life, but it’s one of those things where doing it for the FIRST time is the toughest. In fact, the second is exponentially easier! It’s fear folks, plain and simple! And why it is fear doesn’t make much sense to me. Consider that:

– “Everyone knows that the surest path from low income to millionaire is through real estate.” This appears to be a well-documented truism. I’ve seen a similar statement in some of the most prestigious financial resources on the planet.

– I rarely hear of someone losing it all from real estate. I might be living in la-la land, but for the most part I only hear of people prospering from real estate investing. Sure, occasionally I hear of a deal going bad or growing complicated, but not to the point of ruining people.

– There are a lot of properties available. People are still selling, divorcing, dying, or just not paying the bills and getting their homes sold out from under them. Much of the mortgagee auction activity is not SEEN by the public, but most of it is available to the public.

– There are a lot of properties available at below market prices. That’s been my experience anyway. Of course, I have people right here in my area that tell me they can’t find properties. I just smile and nod my head.

– Rental demand is strong and rents never go down!

So with all this common knowledge and raw opportunity out there, why isn’t everyone investing in real estate?

Here’s my theory.

* Real estate transactions are more involved than going to K-Mart for a pair of undies, so that scares people. You have to learn a little bit. Mind you, this isn’t a lot of learning, but it is apparently enough to keep some on the sidelines.

* The numbers are big. I’ve seen folks nearly FREEZE UP mentally talking about large amounts of money. Merely talking about a $400,000 mortgage causes some people to break out in a sweat.

* Horror stories. Everyone’s heard about some scam, sink hole, meteor or something else on the fringes of believability that has happened somewhere at sometime. I mean, there is SOME risk involved.

* Fear of taking action! It’s hard to do something you’ve never done, and harder to do something you’ve never done before in a subject matter on which you aren’t an expert! People fear something, which makes facing that fear hard. What I’m referring to is what I call, “IT’S EASIER NOT TO.”

So what does one do to face fear and make a change in their life,

Ah, that’s just as easy as the first question. I can also answer that in one word…KNOWLEDGE.

Once properly armed with the knowledge they need, most people can overcome their fears to the point of taking action.

So if you are contemplating taking your financial future into your own hands by investing in real estate, FOCUS on one thing for the next 3-6 months. Buy books or courses, got to real estate investing club meetings, visit websites and get on discussion groups. Let those things be your action steps for awhile. I suspect you’ll be ready to dive into the market with the knowledge you’ll gain.

 “Knowledge Always Precedes the Money.”

Author: Melanie Burns

If you have found a property, or are looking at refinancing to access equity so you can take the leap into Real Estate Investment then contact us to discuss your home loan options. Whether you are self-employed, PAYG, credit impaired, looking to invest via Self Managed Super or looking to construct, or even if you are seeking funding for a commercial property the team at Sherlock Holmes are mortgage specialists here to help you finance your dreams!

Oh, that’s an easy one. I can answer that in one word. FEAR. Real Estate investment is a great way to change just about everything in your life, but it’s one of those things where doing it for the FIRST time is the toughest. In fact, the second is exponentially easier! It’s fear folks, plain…

Commercial Real Estate Misconceptions: You Mean Location, Location, Location Was a Lie?

Commercial real estate is a wonderful, exciting business that can offer a wealth of opportunity for those who look for it! Many people are often hesitant to enter the market of commercial real estate for many different reasons. In fact, there are some major misconceptions about commercial real estate which I am going to address here.Many people who hear about commercial real estate, but aren’t necessarily in the business, often use the expression “location, location, location!” Many people associate this expression as the truth, that the three most important attributes about a property are “location, location, location!”

I am here to tell you – this is absolutely not the case! Now, I am not going to say location is not important, but what if you have a beautiful location for a Bushland retreat, complete with hills, a perfect location for a hotel, and beautiful mountain views? What you want to do to the property is improve it as a weekend getaway for romantic couples with a beautiful hotel, resort, luxury type housing, and perhaps some individual cottages overlooking the bushland. Sounds great, right?

The perfect location- you can’t beat it! But, you learn that the zoning for this property is residential. The use is only one single family residence per acre, and no commercial property allowed. What happened to your “location, location, location?” It flew out the window!

The most important aspect of a property is the use. What is it intended for by designation of the council? It does not matter where the property is, if you cannot get the zoning that is in the realm of your intended use.

It is possible to get properties rezoned, especially as cities and towns change and grow. Be sure to consult with the council to determine if these changes are even possible, because you do not want to buy a property that you cannot rezone, and be left with an unprofitable property on your hands.

Most people believe that commercial real estate is complicated and you need a special education or know how to succeed in the business. Many think that commercial real estate is filled with international finance, heavy and complicated math, complicated tax rules, and forms and applications that are just too complicated to understand correctly.

I am happy to tell you this misconception is the worst, because it puts a road block in front of many people’s aspirations to become a commercial real estate insider. Let me put this misconception to rest. There is math involved, and most of it is not at all complicated: simple ratios, adding, subtracting and multiplying. What is even better is you don’t have to do the math. There are others who can do that for you. The same is true with property management, inspecting the property, and doing the end of year taxes. In fact, commercial real estate is less complicated than residential real estate because you can focus your energies on a single deal that will be worth perhaps 10, 20, even 50 residential deals!

Let me put it into perspective for you. If you owned a business (many of you may), would you create strategies, keep the books, manage the many locations, sell on the front floor, and take out the trash after the day was over? I think not! Commercial real estate is made up of many people whom are there to help you with whatever you need. You must position yourself as a real estate insider, which is a leader in the business.

Another misconception is commercial real estate is management intensive, that you must manage every property you own. Let me tell you when you end up owning 10 or more properties, this is almost impossible to do! You do not have to actually manage your properties yourself, so you can concentrate on creating more deals. Hire a company or agent or set a team in place to take care of this “day-to-day” business.

As you can see, what is passed around in dialogue about commercial real estate is not always true. Before you take everything to heart, be sure to get your facts straight. In fact, many people in this profession speak about commercial real estate as a business in which only the savvy and sophisticated can succeed. They often act this way because they want to keep people out of the market by differentiating themselves. If you were in this position, you would too!

Author: Melanie Burns

To discuss this article or anything else to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you.

 

Commercial real estate is a wonderful, exciting business that can offer a wealth of opportunity for those who look for it! Many people are often hesitant to enter the market of commercial real estate for many different reasons. In fact, there are some major misconceptions about commercial real estate which I am going to address here.Many…

Three Character Attributes Every Successful Commercial Real Estate Investor Must Have

Known for his tremendous wealth, ability to put together the largest, most profitable commercial real estate deals, and famous reputation, and whether you love him or loathe him, there is no denying that Donald Trump is the commercial real estate investor icon of our times.

Although we know he has extremely creative financial and investment strategies, and expert legal advice from people such as George Ross, he has more than just the average investor. There are other investors who probably know as much as Donald does, or more. However, they do not have the successful qualities that allow them to create such wealth from commercial real estate and accomplish the goals Donald has.

Donald has three successful qualities that you need to possess to truly create the quality of deals and wealth he is known for. These qualities are his ability to build relationships with everyone he works with, his ability to sell the big picture, and strong, overpowering charisma that takes a room by storm.

Almost any deal can work to your advantage if you work on and develop these skills. You may have strength for one or another. However, in order to have this industry at your fingertips, you must master each one. Success is delivered through the relationship between these characteristics, as one is not as good without the other or by itself.

Being able to build relationships with everyone that you work with is absolutely critical in the commercial real estate industry. You want to rub elbows with the decision makers in your city; those who are in charge of council zoning and planning committees at every level of the city. Get past the gate keepers and speak to the core people asking for their advice and become close acquaintances on a first name basis. These relationships can be implemented before you even think about doing a deal where their influence may be necessary. Relationships will not only get you insider information, but will give way for special favours and a good word to others who may influence your accomplishments.

Charisma is the ability to ignite passion and motivation among all those who are in an ear’s reach of the person. Charisma allows everyone to breakthrough barriers that otherwise would remain standing. Those who are charismatic can make even opposing forces agree on a common goal and move forward ambivalently. Donald can do just this – igniting passion and excitement that lines people up to follow in his direction. He becomes a true leader that others happily follow because they believe in him and his message. This characteristic will let you bring people on board that otherwise wouldn’t even think about working in your favour. It is a very helpful and powerful characteristic to possess.

The final characteristic is selling everyone on the big picture – everyone who is influenced by the value created in the deal. The community, the city, builders, developers, banks and even businesses around the location in which the project is growing all need to understand what is not there currently. As you know, these projects that were once old, dilapidated buildings that did absolutely nothing but bring the city or suburb down, can be turned into multi-million dollar establishments that can change the value of the entire city.

Do you have these qualities? Do you see yourself having the same effect on others as Donald Trump has had on the many people he has worked for? Everyone can master these abilities with a little focus and practice. Study others who are successful and possess these qualities. And remember that they are most effective when working together, not standing alone.

Author: Melanie Burns

To discuss this article or anything else to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you.

Known for his tremendous wealth, ability to put together the largest, most profitable commercial real estate deals, and famous reputation, and whether you love him or loathe him, there is no denying that Donald Trump is the commercial real estate investor icon of our times. Although we know he has extremely creative financial and investment…

How NOT to get a Commercial mortgage loans!

Commercial mortgage loans : Here are a few tips on how not to get a mortgage, and underneath each one, the smart thing to do instead.

1. Don’t haggle.

A mortgage or a house is just another consumer product. A few clever words can get you a sweeter deal.  So haggle!

2. Don’t look at the small print.

Companies may offer very low rates upfront, but hide additional costs in the small print. Beware of additional costs not immediately apparent.

3. Go for a long term.

Try to keep the term of the mortgage as short as possible. The shorter the term the less you pay in interest. Consider a twenty or twenty five year term instead of thirty years if you can afford it.

4. Buy the most expensive property you can (barely) afford.

Resist the urge to splurge. Some lenders will offer up to six times your salary. They’re not doing you a favour. Get the minimum the missus will be happy with. Divorces can be triggered by loan defaults.

5. Ignore your credit rating.

Improve your credit rating as much as you can. Pay off old loans, and once they’re paid off, check your credit report. Ensure you pay all your bills on time (or before time); never later than the due date. Pay off credit cards and keep their balances low. Close unnecessary credit card accounts.  Open a savings account at your bank if you don’t already have one.

6. Focus on the interest rate.

Don’t get too caught up in comparing interest rates and various special offers; they may not reflect what you will get if you apply. Everything depends on your own financial circumstances and the types of features of a loan that are important to you.

7. Ignore your outgoings.

Write up a budget of your monthly expenses; factor in daily, weekly, monthly and yearly outgoings. See how much you can truly afford to put towards repayments.

And …

8. Rush to take the time-limited-one-time-only-discount-special-offer.

The deal that seems too good to be true probably is. Avoid jumping straight into what could be the biggest purchase of your life. Check it out first.

To discuss this article or anything to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you. commercial mortgage loans

Commercial mortgage loans : Here are a few tips on how not to get a mortgage, and underneath each one, the smart thing to do instead. 1. Don’t haggle. A mortgage or a house is just another consumer product. A few clever words can get you a sweeter deal.  So haggle! 2. Don’t look at the small…

Demystifying mortgages – 12 myths about lending every first home buyer should know.

Myth #1
You need at least 20% deposit to get a mortgage         
In today’s market that is not necessarily true.  While it is correct that having a deposit is the ideal situation, if you are currently renting and just cannot save enough for a deposit there are many lenders that offer low deposit home loans.  Borrowers can often borrow up to 95% of the purchase price which is a tempting offer for any first time home buyer wishing to get into the property market. A low deposit home loan may often attract higher interest rates or more stringent policy restrictions but if you are confident you can afford the repayments then you can achieve the dream of owning your first home with a minimal deposit.

Myth #2
Fixing your rate is safer than a variable rate
When interest rates are high, many are tempted to fix their rate to protect against further hikes.  All is well with the world and as a borrower, you feel incredibly happy that you are not affected by the next huge rate increase.  The problem here is that if rates fall, you end up paying a higher interest rate compared to the variable rate.  Fixed rate home loans do offer some security in an uncertain market, and also allow borrowers to know exactly what their mortgage repayments will be for the next one, three or seven years. Everyone is different and has varying financial requirements so talking through your options with a mortgage broker is recommended.

Myth #3
A bad credit history means you won’t get a home loan
Let’s get one thing clear.  A bad credit history is not good.  Any missed or default payments on credit cards or mobile phones are recorded.  Even if the amount was small or years ago, it affects your credit rating.  However, not all is lost.  Lenders will consult your credit history and feed this into their own credit scoring system.  If it turns out there are issues, the lender may take a closer look and may still approve a home loan if you meet the requirements.  Similarly, non-conforming lenders provide an alternative option for borrowers who have been refused finance by traditional lenders.  Non conforming lenders are an ever expanding avenue and offer in many cases quite competitive products providing opportunities which were once deemed impossible.

Myth #4
I can still get a home loan even though no income, because I have several assets
Yes, you may have a collection of stamps from the 1920’s to be proud of, but it’s not going to convince a bank to lend you $400,000.  Assets aren’t the same as income, and it’s your regular income that lenders get excited about.  Lenders will only lend as much as people can afford to repay, and a first time home loan is a big commitment. The amount of income earning capacity you have will ultimately determine how much you are able to borrow.

Myth #5
Get the lowest rate possible
Be cautious with low interest rates.  A cheap rate is attractive, especially to first home buyers, but take note because these low rates often come with less features on the home loan, reduced flexibility and higher fees. They may only be an introductory rate and once that honeymoon period is over you could find yourself paying a much higher rate.  Often a loan with a slightly higher rate but more features will save you money over the life of the loan.

Myth #6
Credit cards are okay if I pay them off.
When it comes to credit cards it’s not all about the balance on your card, or cards, it’s the total available credit that counts. Having a large range of credit does not necessarily equate to a good credit history.  Often it’s the credit card limit, not the balance that counts.  So even if you pay off all your credit card debts, if you still have a high limit this can affect your servicing and chances of approval.

Myth #7
I can roll my personal debts into my mortgage
So you have a car loan and credit card debts, and you want to roll all of these into your home loan?  Makes sense, as the interest rate on your mortgage will be lower than your current rate.  But, first home buyers are not usually able to just throw all their debts together like this.  Usually you have to build up equity in the property and then use this equity to service the additional debt.

Myth #8
A low-deposit home loan means you don’t need any savings.
This one is most certainly not true.  First home buyers get excited and tend to think that a 95% per cent loan means that they do not have to pay much money upfront.  But, a 95 per cent home loan only covers most of the cost of the property, and not all the purchase costs such as stamp duty, legal fees, property inspection fees and lenders mortgage insurance (LMI).  You will still need some savings to cover these costs as well as the 5% deposit.

Myth #9
Start by paying just the minimum amount
Many first home owners pay only the minimum monthly repayment, as they adjust to the new financial commitment.  However, at the start of the loan you are really only paying interest so by paying more than the minimum, you quickly reduce the amount of interest and principle on the loan.  As interest is calculated daily, repaying twice a month instead of once per month can also save you thousands in interest.

Myth #10
Mortgage insurance protects the borrower
Lenders Mortgage Insurance (LMI) protects the lender, not the borrower.  Borrowers who can put down a 20% deposit should not need to pay LMI but borrowers with any less than this will pay LMI to the lender.  The less deposit you have, the higher the premium.

Myth #11
Offset accounts save you money
Home loan offset accounts are a great idea, but only for those borrowers who are responsible with their money and have a regular income. If you have a shoe addiction or tend to buy all your mates extra rounds at the pub, you may want to think twice about offset accounts.  Your income goes straight into your home loan account, pays your mortgage repayment and then you can use the extra funds for other expenses.  However, if you have bad spending habits you could end up spending more.  Be careful not to end up in negative equity because you didn’t monitor your spending.

Myth #12
Refinancing saves you money
Perhaps you have just bought your first home, and you are enjoying all the benefits of your own home.  Your first time mortgage is going well, but perhaps you fixed your rate six months ago and now rates are coming down, or maybe you want to switch to a different lender.  Refinancing sometimes costs money. In the way of exit fees for existing home loans, and settlement fees for the new loan.  However, the market is quite competitive currently and some lenders are giving all the power to the home owner.  Shopping around and refinancing your home loan can save you thousands over the life of you loan, but can also end up costing you more, so talk your possible choices through with a mortgage broker before making your decision.

Author: Melanie Burns

To discuss this article or anything to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you.

Myth #1 You need at least 20% deposit to get a mortgage          In today’s market that is not necessarily true.  While it is correct that having a deposit is the ideal situation, if you are currently renting and just cannot save enough for a deposit there are many lenders that offer low deposit home loans. …

The “REAL” Real Estate Roller Coaster

Buying a home is a process fraught with emotional ups and downs. For most people, it will be the most expensive and involved purchase they ever make. On top of the importance of this purchase, is the lack of time one has to make a decision before purchasing a home.

The average amount of time a potential homebuyer spends looking at a prospective home is 96 minutes! For a home that you may spend the next ten to twenty years living in, well, an hour and a half seems like an unjustly short amount of time spent to make such a drastic decision. This “hot” decision making environment, where the pressure is on, is one of the key aspects of a buyer’s emotional stress. But, the fact is, good homes sell fast, and buyers have to be ready to commit to a purchase in a short time. This being said, the “sure fire” way to make a good decision in such a short period of time, is to learn to become a smart, analytical shopper. Not that emotions need to go entirely by the way side – but you must know when emotions are playing into your decision making process, what is at the core of those emotions and whether or not they are helpful to your process. Be your own psychologist, and the sooner you do the sooner you will get off the doctors couch and into a new home!

One approach to help mitigate the emotional roller coaster of the buying process is to truly set out your specific priorities in terms of what you want and need in your new home. Ask yourself, “In order of importance, what are the most important elements for my/our new home?” Proximity to schools, the location and neighbourhood, commuting distance, rates and costs, energy efficiency, shopping accessibility, and recreational facilities are just a few of the considerations a buyer should prioritise beforehand. If purchasing with a spouse or partner, you may discover your priorities are slightly or even vastly different. It is very important that you spend the time to make concessions and get on the same page as best you can.

Other aspects of your priority list may include the type of home you are looking for. These parameters could involve the size of the home or a particular style of home. If you’re set on a particular style of home, this may affect the neighbourhood parameter of your search, as not all houses of certain types are in every neighbourhood. So, as you see, one way to help curb emotional reactions, is to make sure you know what you’re looking for, and in doing so narrow your search. This way, what you’ll be looking at will be within the list of parameters you set out in your priorities. You can then rank homes based on how well they fit into your priority system. Of course, there will be concessions to be made here, as it may not be that a home fits your every single priority in exact order – but at least you’ve done some good analytical homework in advance and have a system for ranking your prospects.

Another tip for dealing with emotions, is to catch yourself when you are honing in on one particular feature of a home, as the “dream feature” of the home.  A “dream home”, should be so, because it satisfies those myriad of components (priorities) that create “your dream of your home”. You may want to check in and ask yourself if you’re being clouded by one enticing feature and have lost touch with your list of priorities.

Another dangerous aspect of buying a home based on your “gut” feeling, is that your guttural instinct may be good for you, but not so great for re-sale. It is, in almost all cases, very important that you consider the potential re-sale value of your home as one of your top priorities. You don’t want to be stuck with a “dream home” that turns out to be everybody else’s nightmare. The investment aspect of purchasing a home, lies in its re-sale value. Now, this doesn’t mean you have to buy in a well-established, totally investment-proof neighbourhood. You may have done your homework and feel confident in buying in a neighbourhood that has great potential for five to ten years down the line. Likewise, the home you are investing in may need improvements that you have the funds and/or the expertise to accomplish. But, you must at least consider the re-sale value of your potential home. Otherwise, you could be investing in a money pit that you’ll never be able to unload for the money that you should.

Keep in mind, smart sellers are bound to know the realm of buyers emotions, and will appeal to your weaknesses. Keep your critical eye sharp, especially when a home seems to smell of professional home staging. It’s not that home staging is trickery, or dishonest, but you might need to work extra hard to look beyond the beautiful and well-appointed furniture and the incredible artwork and the smell of Lemon Meringue Pie – as none of the above are included in your purchase.  Just make sure you look at the house itself and not its decor, set-up – and, DON’T EAT THE PIE!

If all these steps have been taken, you’ve approached the searching process having analysed and prioritised your wants and needs, and you’ve considered the re-sale potential of the properties, then you can allow your emotions to guide you somewhat. Perhaps you’ve been lucky enough and smart enough to mine out two potential properties that fit both your priorities and parameters, at this point, a bit of the old gut instinct can refine your process and actually help, and not hinder the decision making process.

Author: Melanie Burns

To discuss this article or anything else to do with your finances, please call our office today on 0434 087 735 or email us and we will be happy to assist you.

Buying a home is a process fraught with emotional ups and downs. For most people, it will be the most expensive and involved purchase they ever make. On top of the importance of this purchase, is the lack of time one has to make a decision before purchasing a home. The average amount of time…

Timing the market: how the cycles affect your portfolio

Having a thorough understanding of the real estate cycle enables you to time your move accurately and maximize your returns.

Most real estate investors face many challenges in building a profitable real estate portfolio. Determining whether to purchase or liquidate, raise or lower rents, or deciding which sector of real estate to participate in can be determined more easily and profitably by understanding the real estate cycle and the important attributes of its behavior.

It is tough to be at the beginning of a trend. People tend to follow the crowd (or the media) and consequently buy yesterday’s deals. It is much easier to profit when you are buying at the beginning or even in the middle of a cycle. If you can accurately time a rising market, you can benefit from higher rental income due to higher occupancy which results in upward pressure on property values and conversely liquidate when the opposite is evident.

Fortunately for real estate investors, the movements of real estate prices are slower and more predictable than the stock market due to the slow response to promising or discouraging economic movement.  The real estate cycle displays different characteristics based on whether the property is a free-standing house, a high density unit or a commercial property. Property values in office buildings are generally more susceptible to swings in a cycle than industrial buildings, retail buildings, apartment buildings and residential.

Demand drives each of these sectors. In the case of office buildings, the demand for office space is tied in directly to employment and the financial sector. Demand for industrial space is powered by manufacturing, transportation and the need for warehouse space.  Demand for retail space and apartment units is stimulated by population and growth of income.

All cycles are local

The real estate cycle can vary significantly from city to city and even down to suburb, compared to aggregate national statistics. A local real estate cycle can react differently based on economic demand for housing and can have longer or shorter peaks or troughs than the national cycle and nationally reported statistics.

It is important to understand the local real estate cycle wherever you decide to invest in order to make decisions that will be profitable. Being able to predict what will be happening in your local market based on specific key indicators will allow you to analyze expected returns, forecast property income and potential value increases or decreases. This can also aid in buy or sell triggers in your portfolio based on over or undersupply in the market.

Stages of the real estate cycle

There are typically four stages to each real estate cycle. In order to properly analyse, you need local data describing historic appreciation or depreciation which ultimately boils down to supply and demand.  For instance, demand for office space increases as a result of higher employment which in turn stimulates retail and residential demand. Conversely, demand for office space decreases as the value of market rents goes up. This factor spills over to retail and residential.

One must be aware of other indicators that are prevalent in each of the four stages of “top”, “down”, “bottom” and “up” of the cycle, specifically pertaining to residential properties.

1. Top of the market

Many Australian metropolitan cities today have been touted as being at the bottom of their market whereas others are on their way back up, some are booming and yet others remain stagnant. Historically cycles last from seven to 10 years, which allows us to learn from the past and better prepare for what and when our next move should be.

There are key indicators that are indicative of any real estate cycle. At the top of a market, prices are high. This sounds like an obvious statement, but what contributes to factors driving prices up?

Typically when there is high demand, the price goes up. This is usually triggered by employment opportunities, an enticing lifestyle or a retirement destination.

To properly analyse a residential market, you need to know the if the number of sales are increasing month to month, the number of days on the market it takes for a property to sell, if multiple offers on properties are becoming common – this drives property prices up even higher.

Other indicators can be observed just by driving around observing the construction industry. If stock is low and demand is high, people are generally very optimistic.

Vacancy rates will be lower so there will be less “For Rent” signs evident.

Your game plan

  1. If you can raise your rents, now is definitely the time.  Renew leases. With low vacancy and high migration to the area, there is high demand for properties. However, if interest rates are low, renters may be jumping into new homes.
  2. Once over-building is evident, you may consider liquidating one or more of your properties, particularly any underperforming properties, which may sell for a great price.
  3. Buy-reno-sell strategies can work well at the beginning of this phase provided the property is acquired under fair market value.
  4. You may consider selling later in this cycle.

2. A down market

A downward trending market happens after the top of a cycle. This move can be subtle at first. Many inexperienced investors can “get caught” during this shift, resulting in potential losses.

This can result from maintaining a selling price higher than the market will bear rather than anticipating the downward trend and unloading the property with good pricing or speculating in preconstruction.

A downward trending market occurs when new construction exceeds demand and/or prices hit maximum affordability. Once this happens, prices begin leveling off, demand slows down, and public optimism becomes uncertain.

When a market has too much inventory, sales decrease, ultimately triggering the amount of listings to increase.  This causes the average “days on the market” (DOM) of each property to increase, naturally triggering a downward pressure in prices. The market ultimately dictates when the decline will stop and what prices are reasonable.

Vacancy rates begin increasing as tenants have more choice of units and landlords begin offering discounted rents or move in specials.

Your game plan

  1. If you missed selling at the top of the market, sell fast and don’t hold out for top dollar.
  2. You may need to decrease rents or offer incentives to attract or keep tenants.
  3. Many landlords will have higher vacancies and may be highly negotiable on price (wait until later in the cycle).
  4. If you don’t sell now, hold your existing properties until the market corrects.

3. The bottom

At the bottom of a market, general public perception of the economic outlook is negative. Higher unemployment prevails and the banks’ lending criteria becomes more stringent. Prices tend to decline and it is not until prices ultimately begin to increase and vacancies begin to decrease that you will know where the bottom is (or was). Foreclosures or power of sales become more frequent and economic pessimism prevails as demand continues to slow.

New construction during this time drops. However, new builds already underway still come on line. Many contractors either become renovators or get out of the business.

Your game plan

  1. Take buying slowly but start buying distressed properties later in the cycle.
  2. Holding and waiting for the “up market” indicators if you are looking to ultimately sell.
  3. Provide furnished rentals to keep your unit rents up.
  4. Approach builders who have unsold inventory and purchase one, several or all of their unsold inventory at a discount or with a purchase option.

4. The Up Market

During this time falling housing prices have bottomed out and are stabilizing and demand is slow. New inventory is down as new construction is almost at a standstill. However, as the cycle continues and demand becomes more evident, new construction begins as does pre- construction speculation.

In an “up” market prices will begin to increase based on stimulation of the local economy, thus increasing demand. With less property available, there are less listings, the days on market decrease and multiple offers on property become prevalent.

From a rental perspective, this creates a diminishing supply of units, which triggers lower vacancy and higher rents.

Your game plan

  1. Buy for bargain prices from other investors who still haven’t realised a new cycle has begun.
  2. Increase rents.
  3. Buy, reno and sell.
  4. Refinance existing properties to buy more.
  5. Sell if you can move the equity into a more valuable property.

The public is usually driven by the media who are usually trailing the middle or even the end of a wave. This gives those who are studying the key market indicators a distinct advantage. However, acting when no one else has acted takes knowledge, courage and sometimes trusting your gut.

To discuss this article or anything to do with your finances, please call our office today or contact us via email and we will be happy to assist you.

Having a thorough understanding of the real estate cycle enables you to time your move accurately and maximize your returns. Most real estate investors face many challenges in building a profitable real estate portfolio. Determining whether to purchase or liquidate, raise or lower rents, or deciding which sector of real estate to participate in can…

Buying A Home With Bad Credit – A few key tips to keep in mind

You can buy a home with a bad credit history; you just need to find the right mortgage financing package. Before you sign up with the first company that offers you a loan, remember to research offers to be assured you are getting a fair deal.
Know Your Credit Rating
Your credit report/history is one of the biggest factors in determining the interest rate you will pay for your loan and the features (or lack thereof) of the loan that will be available to you.  Lenders will require a deposit of generally between 10-20% if their are impairments on your credit file.  The more severe the impairments – the greater the deposit. It is always a good idea to obtain a copy of your credit file prior to applying for finance. This is a good time to make sure all the information is correct. Any discrepancies should be checked out and corrected before applying for a loan.

 

Know The Fees

Arm yourself with information so you will know what are reasonable fees for your type of loan. Mortgage brokers are paid for their work through points paid up front or through the lifetime of the loan by the lender. Lenders also make money through points.It is reasonable to expect to pay up to 2-4% above normal variable interest rates for credit impaired mortgage, but any higher and you should be wary. There are always exceptions to this, so use your best judgment and compare.

Read The Fine Print

Once you get an offer from a broker, make sure you read the fine print. Interest rates are easy to compare, but you should also look over the fees that are involved which can add up to thousands of dollars. Also, be sure to understand any fees for late or missed payments.To discuss your mortgage options please feel free to contact us and we can review your options and provide you with a free comprehensive loan assessment.

Things to look for from your mortgage broker

Buying or refinancing a home is one of the biggest decisions you’ll ever make. It’s not easy and there are a multitude of hurdles to overcome. As such, it is important to feel like you’re working with someone who has your best interests, both personal and financial at the forefront of their mind.

Here are the most important factors to take into account when deciding to use a mortgage broker to assist you with your finance needs.

Not just interest rates

While it seems logical to look for the best interest rate, and the media, big banks and most of your friends and family all will prioritise interest rate to you, a lot of borrowers are surprised to learn that most lenders will offer the same rates. And any differences will likely be quite minimal. It is the features of the loan, and the loans ability to service your individual specific requirements that should be a priority.  Rate is important, however the other aspects of the loan need to be considered in order to provide you with an overall finance solution. A good mortgage broker will not only tell you this, but provide you with that solution.

Good signs:

When you’re looking for mortgage broker, here are a few indicators to watch for:

  • Availability
    Does someone answer the phone when you call? Or at least return your call within a reasonable time frame? Have you been assigned to a specific lending manager who you can call directly and who will call you back and knowledgeably answer your questions?
  • Information
    When you have questions do you feel like you can talk to your mortgage broker and get an informed and knowledgeable answer? You’ll be surprised in your hunt for a broker how many  have bad or outdated information. After some Internet research you will know when someone is behind the times. Make sure you’re talking to someone you trust and who knows what they’re talking about.
  • Reliability
    You should be able to completely trust your mortgage broker to follow through. If the person you’re working with says they are going to do something or call you back, you need to know you can count on them to do it. If you have to pester your broker for a call back or follow up on every detail to make sure it’s been handled, find someone else.

The mortgage experts at Sherlock Holmes Lending Solutions have helped thousands of borrowers through the loan process. We are knowledgeable and responsive. Call or email us to get up-to-date and current information about the mortgage and home buying/refinancing process.

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Buying or refinancing a home is one of the biggest decisions you’ll ever make. It’s not easy and there are a multitude of hurdles to overcome. As such, it is important to feel like you’re working with someone who has your best interests, both personal and financial at the forefront of their mind. Here are…

10 Things that can derail your mortgage application

Getting finance is tough enough, even without having your application sent back due to errors. Here are ten things to help clear the air.

 1 Not being honest about your financial position

Missing bill payments is the number one reason mortgage applications get knocked back. Missed credit payments can be particularly costly. Your credit history should be squeaky clean if you want a home loan. Generally, a default is listed on your credit file after three months of missed payments on a debt commitment. One simple default, say, on a phone bill, could hinder you from receiving a home loan approval for a good five years or more. The easiest way to avoid this is to pay your bills on time, every time. Take the time to check your credit file prior to making your application through websites such as www.mycreditfile.com.au.

What if you’ve had problems in the past? If you’ve had a default, let your broker know upfront and they can select a lender that is OK with it.

2 Not including all your expenses

Forgetting to mention that emergency credit card is also a common problem, and can derail an application. Make sure you disclose all credit cards and hidden expenses – or even expenses relating to your kids. When a lender gets your bank statements, they will see all the payments to the various credit card companies, childcare expenses and school fee payments. If a lender were to see this, they would likely decline the loan due to non-disclosure. It’s best to be honest upfront and get an approval that will be honoured.

3 Employment woes

Lenders like their borrowers to have a relatively stable recent employment record – at least six to 12 months or more in their job, receiving regular income. If you are looking to change employers at the same time you are looking to buy a property, seriously reconsider. Stay at the same company at least until you have the mortgage. But if you must change jobs, ensure you have enough money saved to cover mortgage repayments and living expenses for a few months or even more, should the job not work out.

4 Paperwork snafus

The paperwork that lenders require can be significant, and it is important to get it right: sending in your application without the documentation required by the lender can result in the loan application going back and forth to the lender a number of times without result. At worst, it can derail purchases altogether.

If you only send in part of the information the bank asks for, you end up getting a conditional approval that has lots of conditions. When you find a property and send in the remaining information, the lender may not like something that they see and then has an opportunity to decline your loan.

Using a mortgage broker to handle the paperwork is probably the quickest and simplest way to ensure you get it right first time. But if you’re going it alone, be sure to read the lender’s instructions very carefully several times. And, if you’re putting in a joint application, you’ll need to provide evidence for each applicant.

Make sure you send in the actual documentation that the lender asks for, not substitutes. Aussie Home Loans often sees clients send in ATO tax assessment notices in place of group certificates, or bank statements showing a borrower’s pay being deposited in place of physical pay-slips.

5 Not knowing your limits

It’s all too easy to get caught up in enthusiastically hunting for property without knowing exactly how much you can borrow. This is even more serious when a buyer has made a successful offer at auction and suddenly can’t come up with the rest of the dollars, because they can lose part or all of their deposit.

Avoid disappointment by seeking out a loan pre-approval before looking for property. These are usually valid for three to six months. For pre-approvals dating from last year, you should check it is still valid, as new credit industry regulations came in at the beginning of 2011.

6 Not knowing lending criteria

Lenders and the mortgage insurers behind them work to a wide range of criteria when deciding whether to approve a home loan. They often have restrictions around property sizes, postcodes, high density buildings and other aspects. For example, many lenders put restrictions on the maximum amount they will lend on properties in regional towns, so you may need to come up with a larger deposit. Make sure you know the rules before heading out on the hunt – otherwise you could find extra conditions on your loan or your application denied altogether.

The simplest way to do this is to seek out a pre-approval before looking for property. However, not all pre-approvals are created equal. You should ensure you get a ‘fully assessed’ pre-approval. Some lenders issue an automated pre-approval without any assessment; this usually has a page of disclaimers and is pretty worthless.

7 Not shopping around

Simply not considering all your options in the first place could derail your application. Different lenders offer vastly different loan amounts. Don’t just take the largest loan you can get, either. Don’t be tempted to go with the lender that will lend you the most, as you may quickly find that you are stretched beyond your limits, particularly if interest rates rise, and need to sell up. Once you know what you can honestly afford, extend your search beyond just one or two lenders.

8 Not getting the right loan structure

A mistake many people make is they look for the lender with the cheapest interest rate and then try and change their position to fit that lender’s policy. That’s like going to the $2 shop to buy a suit and then trying to tailor it to look and fit you better.

It’s much wiser to map out your desired loan structure and features first, then start shopping around for lenders who will approve the loan structure at a low rate. Getting the right loan in the first place is particularly important for investors, who often need to make use of loan features like offset accounts and redraw facilities – and can save you from costly interest payments and refinances further down the track.

9 Dinky deposits

Three years ago, it was possible to buy a house without having to put any money down. However, the days of 100% home loans are gone, and almost all lenders require a home loan applicant to have a genuine savings deposit of at least 5%. While some investors will be able to leverage equity in their existing home, it can present problems for first-timers pulling together cash for an investment – especially when you factor in extra purchase costs.

The answer? Do your homework. Get a handle on how much you really need before committing to a purchase – and then add a buffer of at least 5%.

10 Purchase cost pain

As mentioned above, there are a wide range of purchase costs in addition to your deposit, including (but not restricted to): lenders mortgage insurance, stamp duties, legal costs, application fees, solicitor fees and inspection fees. It’s easy to forget all the fees that mount up, and they can easily derail your cash flow projections.

You don’t want to find out on the day of settlement that you are $30,000 short. Do a cash flow summary well before you exchange on a property to ensure that you have enough cash to fund the purchase and associated costs.

Experienced friends, family, mortgage brokers and real estate agents can advise you about the costs you’ll need to pay. They can also give you an insight into ongoing costs, such as land rates, strata management costs, maintenance, insurance and property management.

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Getting finance is tough enough, even without having your application sent back due to errors. Here are ten things to help clear the air.  1 Not being honest about your financial position Missing bill payments is the number one reason mortgage applications get knocked back. Missed credit payments can be particularly costly. Your credit history…