Bad Credit Home Loans

Bad Credit Home Loans








Many families in Australia have varying requirements when it comes to home finance which are often complex. This becomes even more difficult to fulfill when there are bad credit issues attached to the borrowers. Despite this, borrowers with bad credit can still obtain bad credit home loans and this is not always that difficult and daunting to achieve.

Most banks and major institutional lenders follow traditional rules and criteria for lending for bad credit home loans and bad credit mortgages. They follow a specific set of approved criteria which includes a person’s current and historical good or bad credit history. This means that obtaining finance through traditional bank lenders is not easy when you have a poor or bad credit history. But even then you need not worry and feel disheartened as there are multiple options available for borrowers seeking a bad credit home loan.

One of the key factors in being eligible for a bad credit home loan is stability of income. What you must remember is that the lender is making concessions for the fact that you have bad credit or have had bad credit, and therefore other aspects of your loan application, such as your employment history need to be extremely strong to compensate.   If you have been working in the same industry for a lengthy period of time, even if you have changed positions, then it is imperative that you  mention your employment tenure and emphasise this and that you see no reason in the foreseeable future for the stability of your position to change. To support this provide the lender with any additional supporting information, such as letters from your employer, recommendations, past achievements anything you can think of to strengthen and support your advice to the lender that your income and employment is stable. These kinds of things will actually help lessen the impact associated with your bad credit history.

In addition, if you are renting, provide your new lender with evidence from your landlord of your consistency in rental payments.  This will assist in highlighting to the lender that you are of good character and have the capacity to make ongoing regular repayments – again offsetting the impact of your bad credit. If you are not fully aware as to the actual condition of your credit file it is imperative that you obtain a copy and analyse it thoroughly.  Once you have a clear understanding of what impairments are on your file you are able to approach your broker with a clear picture as to the bad credit you have incurred.  Armed with this information, your broker will be best placed to ascertain the most suitable bad credit home loans available to you.

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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!

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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…
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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

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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…

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.

 

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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.

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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…

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.

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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. …

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.

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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…

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…

investment property

Investment Property – 5 ways to sniff out secret sales

Investment Property - 5 ways to sniff out secret sales


Wouldn’t it be great if you could find an investment property before it went onto the market? We reveal how you can find secret property sales.

If you are a buying property for yourself and want to get access to unlisted properties you need to get clever.

1. Become better friends with your local real estate agent
As the key contact between sellers and buyers, agents are the first to be aware of properties for sale – yet so many people are shy about handing over their mobile number at open inspections.
How are you ever going to be made aware of deals or changes in a vendor’s expectations unless you make contact with the agent? You need to persuade the agent that you are very serious about buying an investment property.

Make sure they know you are pre-approved for finance, are serious about buying and can make a quick decision followed by a signed, unconditional contract.

People are often scared about telling an agent what their budget is, as they think the agent will make them pay more. I always say that I can buy up to any amount if it is the right deal, but I am only prepared to pay what it’s worth – and I will get an independent valuation to double check the figure.

2. Letterbox drops
Do what the agents do and letterbox drop in the areas you want to buy.

If you are a serious buyer for the right investment property, the vendor can save time and money by going directly to you. It takes more personal effort and will cost you some money, but spending a few hundred or even a few thousand dollars could get you a great property at a great price.

A lot of vendors always think their property is the best in the street and want a fortune for it, but some do not keep up with the market and want something more realistic.

3. Get organised
Make sure you are ready when the right deal comes along. Get pre-approved for finance and have your valuer, building inspector and strata inspector all in place so they can check you are buying the right property at the right price.

You are never 100% guaranteed of any deal when it happens, so at some point you have got to make a decision and jump in. The more organised you are, the more likely that decision will become easier.

4. Tell friends, family and colleagues you are looking to buy
Often those close to you will know of someone else looking to sell, so spread the word. People love talking about property, so if you mention you are looking every time you talk to someone it won’t be long until you make the right connection.

5. Pay a professional
If you buy an investment property once every few years and a buyers’ agent does it every day and has all the industry contacts, who do you think will buy better? Sometimes you’ve got to spend a dollar to make two.

To discuss this article or anything to do with your finances, please call our office today and we will be happy to assist you 0434 087 735 e: enquiry@sherlockloans.com.au

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