Archive for the ‘Buying Real Estate’ Category

Non Conforming Loans: Also called ‘Sub-Prime Lending’. Non-conforming loans cater for people who do not meet the standard criteria mainstream lenders use for ordinary borrowers. Examples include people who are self-employed, have a poor credit record or who have recently arrived in Australia. Non-conforming loans usually incur higher interest rates.

Portable Loans: A portable loan allows you to sell your house and move to a new one without having to re-finance. This saves application and legal fees, but the loan amount usually has to be the same or lower than the one for your current property.

Redraw Facility: A redraw facility allows you to make additional repayments on your mortgage.

Reverse Mortgage: These loans are good for people who later in their life find themselves to be asset-rich in that they own their own home but income-poor, requiring cash for living costs, travel, etc. A reverse mortgage allows such a person to borrow against the value of their home and access the equity without having to sell the property. No repayments are required during the life of the loan, with the total interest, fees and charges being recuperated from the value of the estate at the borrower’s death.

Service Fee: Usually a monthly fee covering bank cost of administering and maintaining a loan account.

Switching Fee: The lender may impose a switching fee where an existing borrower changes from one loan product to another with the same lender.

Uniform Consumer Credit Code (UCCC): The Uniform Consumer Credit Code legislation regulates credit provided to customers and strata corporations and provides uniform standards for all forms of customer lending in all states and territories of Australia. The UCCC consists of a set of rules regulating the conduct of the lender throughout the duration of the loan. It enforces the Truth in Lending principle, so that borrowers are provided with clear and factual information to assist them in choosing a home loan product.

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agent and Glenelg Property Management Expert.

Many home owners who extend or renovate their homes make money when they sell, while others wonder why they have trouble getting their money back.

“Location is crucial,” Monika Bonet, Principal of Raine & Horne Glenelg said.

“But location aside, there are many factors that minimise the risk of over-capitalising. Home owners should consider consulting an estate agent before making improvements. In many instances agents aren’t called until the work is completed and it’s too late to put the genie back in the box.”

Ms Bonet said that some alterations don’t improve the standard of the property enough to compensate for their cost.

“Some owners sacrifice one feature to gain another thereby adding cost but not value,” Ms Bonet said. “Frequently reported examples of this sort of expenditure include turning a bedroom into a dining room or a garage into a rumpus room. Another common oversight is failing to take proper account of the scale or age of the property when adding on. It is important to make sure extensions are seamlessly integrated with the original home. Many three bedroom homes don’t “work” once a fourth bedroom and family room are added – the original rooms may be too small to balance the extensions and the original property, though in good condition, may look out-of-date beside the new. Furthermore, bad design resulting in poor natural light, an inconvenient floor plan such as a living area that ends up a long way from the kitchen, or a badly positioned bathroom will be reflected in the sale price of the property.”

Ms Bonet said that some renovators over-capitalise by deviating from their budget along the way. “Many homes and locations don’t justify top-of-the-range appliances and fittings. And if renovators run out of money before completing the work or have to skimp on the finishing touches, the overall effect can be disappointing and limit the ultimate selling price.” According to Ms Bonet home owners concerned first and foremost about investment potential need to think twice before making changes for their own unique needs.

“But quality of life is also important and if people stay in a property long term the cost of idiosyncratic changes will usually be absorbed in most locations,” Ms Bonet said. “Those considering making major changes should seek advice from an estate agent with whom they have a good relationship. Builders can tell you what your renovations will cost but only a real estate agent can tell you whether the expenditure is justified.”

This blog post is brought to you be Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts

Fixtures: Items that are fixed or part of the property, for example, carpets, down lights and built in robes. Sometimes sellers specify fixtures they may wish to keep (say, an antique light fitting that belonged to their grandparents). To avoid confusion about what stays and what goes, fixtures can be identified as a special condition in the offer and acceptance document.

Foreclosure: The process by which a lender sells a property given as security for a mortgage, usually as a result of the borrower’s failure to repay the loan.

General Conditions: These deal with important contractual obligations for both buyer and seller including such matters as the paying and holding of a deposit, settlement, adjustment of any outgoings and any other payment responsibilities. It is possible to vary the contractual obligations. You can for instance, delete or amend existing contractual obligations that form the General Conditions, but the seller would have to agree with the changes if the contract is to be binding.

Home Equity Loan: A home equity account gives you a revolving line of credit secured by the value of your house. This allows you to use the funds for other purposes such as the purchase of a second property, shares or other investments. The interest rate is generally higher than a standard variable rate, and these loans should be treated with caution.

‘Honeymoon’ Rates: “Honeymoon” or introductory rates are offered to entice borrowers with a low advertised rate for the first six to twelve months of the loan. After this the loan automatically reverts to the Standard Variable Rate offered by that lender. Use the ‘Comparison Rate’ to better understand the costs associated with such loans.

Joint Form of General Conditions for the Sale of Land: (the General Conditions) are a standard part of any contract to sell a property and deal with many issues that arise between a buyer and seller entering into a contract. When an offer is made, a printed set of General Conditions is presented to both the buyer and seller.
Joint Tenancy: The ownership of property by two or more persons where there is a right of survivorship, that is, where on the death of one joint owner, the share of the interest of the deceased goes to the surviving owner(s).

‘Low Doc’ Loans: ‘Low-Doc’ or Low Documentation Loans are designed for the self-employed who don’t have the documentation required to get traditional home loans. The interest rate is higher than the Standard Variable Rate and Low-Doc loans usually require mortgage insurance, adding to their cost.

LVR stands for ‘Loan to Value Ratio’: LVR refers to the maximum amount you can borrow against the value of the property used as security for your home loan. For example a lender may approve a loan for 85% of the property value, while you will be expected to provide the remaining 15% plus costs and insurance.

Mortgagee: The lender in a mortgage agreement

Mortgage Offset Account: Offset accounts can help reduce your tax by offsetting taxable income from deposit accounts against interest paid in after tax dollars on mortgage repayments.

Mortgagor: The borrower in a mortgage agreement

In next week’s blog see Part 3 of the A- Z Jargon for Home Buyers…

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agent and Glenelg Property Management Expert.

What are the benefits of a ground floor/garden apartment?

If you’re considering a ground floor or garden apartment, there are a number of excellent reasons to make the purchase. If a ground floor apartment comes with a garden, it often means that you’ll secure a bigger floor space than others in the unit block. Moreover, a garden will extend the floor space beyond a balcony.
A garden unit also often means a homeowner has direct access to a property, rather than through a communal entrance. This is a very attractive feature for some buyers, as it gives them a similar feeling to living in a semi or
a house.

Depending on its size, a ground floor apartment is often cheaper than an upstairs home unit. Perceived security risks are often at the heart of the price differential, although any fears can easily be allayed with a good quality security alarm and some extra deadbolt locks.

Should I buy a heritage listed home?

Heritage listed properties are an interesting option if you’re looking for a home with a significant point of difference. Whether you buy your own ‘piece of history’ or not will depend on which particular camp you sit in. In one corner, you’ll find those who are proud to own a home that’s considered significant enough to warrant a heritage listing. On the flipside, others will be less pleased with a heritage order, as it minimises severely the development or renovation opportunities.

That said, where a heritage listing can deliver excellent prices is when an owner has taken the time to carefully renovate a home by the book. A heritage home, whether it’s in a city or a regional town, will generally come with high ceilings and attractive features such as ornate architraves, Federation style balconies and so on. Therefore if it is renovated in a high-quality way, employing excellent architectural techniques, especially where there’s a stylish blend of old and new, buyers will generally come knocking.

This blog post is brought to you by Raine & Horne Glenelg your Glenelg Real Estate Agents and Glenelg Property Management Experts.

Adjustable Mortgage: Where the interest rate is adjusted periodically by the lender. Some people prefer a fixed rate as the maximum amount payable can be budgeted for. Also known as a variable mortgage.

Amortisation: Where the loan is paid off in equal periodic payments, calculated to pay off the debt (principal and interest as well) at the end of a pre-determined period.

Body Corporate: The legal entity which represents the apartment owners when dealing with matters of the common areas of the apartment block in which they own apartments. The Body Corporate funds costs associated with the common areas through a quarterly levy on the apartment owners.

Buyers’ Agent: An agent who is paid a fee by a would-be purchaser to act exclusively for that buyer in their property search and subsequent purchase. Very few buyers utilise the services of a Buyers’ agent but it’s worth remembering that the selling agent represents the seller of the property rather than the buyer.

Certificate of Title: A page of the Register book specifying the ownership of a defined land parcel, and the lodged or registered interests or claims (encumbrances) against that ownership.

Chattels: Items that can be moved and are not considered to be part of the structure of the dwelling, for example: dishwasher, clothes dryer, microwave, mats and pot plants. If there is any confusion between the buyer and the seller about what stays and what goes, these can be identified as a special condition in the offer and acceptance document.

Cooling off period: In some places cooling off period doesn’t exist. But where it does exist, it refers to a designated period – usually a few days – after the contract has been signed, where buyers have time to reconsider their choice and change their mind without penalty.

Depreciation: The decline in value of a property due to either wear and tear on the property itself or changes in the value of the area (e.g a block of units being built and overshadowing a house or street widening that increases traffic noise).

Discharge fee: The discharge fee is a one-time payment charged on the final payout of a loan.

Encroachment: The physical intrusion by a structure on the property of another person.

Encumbrance: An encumbrance is a lodged or registered interest in land by a person who is not the registered owner.

Encumbrances – Caveat: ‘Caveat’ means ‘beware’. This term is a warning to prospective buyers that another party has registered some form of right or interest in the property. Details of a caveat are written on a property’s Certificate of Title (such as money is owing on a property that is for sale).

Encumbrances – Easement: Gives a person or a company ‘rights of use or engagement’ over land owned by another. Usual easements are rights of way, easements for the flow of water over and through another’s land and easements of support (for example, Water Corporation, Western Power, Main Roads WA, telecommunication companies).

Encumbrances – Restrictive covenant: This places some type of restriction on the use of the land. For example, to build a certain height or the land must be landscaped or buildings to be constructed only of brick. For the covenant to be lifted, consent must be obtained from the party named in the covenant or by a court order.

Encumbrances – Right of way: This means a section or strip of the property is for use either by the general public, or a restricted section of the community. It may be created by subdivision, specific transfer, or continued use over a period of years.

Establishment Fee: This fee covers the basic costs in setting up loan from initial interview to loan drawdown.

Exit Fee: This fee is imposed by some lenders when the borrower refinances with another lender in the first few years of the loan. Some exit fees can be high, so make sure to research whether there is an exit fee for your chosen home loan.

F- M Next Week

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agent and Glenelg Property Management Expert

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

With a maze of lenders to choose from, is it better to have a bank or a non-bank lender, such as credit union, managing my mortgage?

Ultimately, choosing a mortgage offered by a bank or credit union are equally acceptable options. The more significant issue is working out which lender presents the most cost-effective mortgage for your circumstances.

Since 1983, when our financial system was deregulated, the Big Four (Commonwealth, ANZ, Westpac, NAB) have faced increased competition from overseas banks and non-bank lenders. As a consequence, they have been forced to offer more competitive interest rates. That said, the banks may offer a broader range of bells and whistles, but you’ll pay for these extra features by means of fees and charges.

A credit union is a cooperative where members are customers and shareholders. They are non-profit organisations, and therefore can often offer extremely competitive loans. The rub is that you will need to join a credit union to take advantage of cheaper interest rates and fee structures, while you might find they don’t offer as much flexibility as a bank.

If you feel you need some help sifting through the web of lenders, we recommend you call Belinda Sugars; a qualified banking specialist from Mortgage Choice. To contact Belinda call 1300 768 258, or visit MortgageChoice.com.au/Belinda.Sugars.

What features should I look for in a first home?

With your finances under control with the help of Mortgage Choice, you can now hit the road in search of your first home. This is definitely the fun part, but be prepared to wear out some shoe leather finding your ideal property.

Remember too, particularly with a first home, most buyers need to make compromises – especially when it comes to the type of property or location.

That said, your home is a major investment, which should grow in value over time, and to give you the best chance of decent capital growth, take some time to consider the following factors:

1. Growth potential – look for an area where adjoining suburbs are experiencing rising values or that will benefit from a major government or commercial infrastructure spend.
2. An attractive outlook – this could be harbour, coastal, river or bushland views.
3. Distinctive features – from period features to an attractive, well-established garden, unique features can create scarcity, and in real estate, that adds value.
4. Opportunities for indoor/outdoor living.
5. A location offering proximity to transport, schools, shops and lifestyle facilities such as restaurants.

This blog post is brought to you by Raine & Horne Glenelg your Glenelg Real Estate Agent and Glenelg Property Mangement Experts.

It angered pundits and mortgage holders alike, but Angus Raine, CEO of Raine & Horne, says the decision by the big banks to hike up variable interest rate mortgages is not the end of the world for the Australian real estate market.

“There is still more than enough good news around for the Australian real estate market,” says Mr Raine. “A rate rise is never good news for those with a mortgage or aspiring first home buyers.”

“However market sentiment is stronger than this time last year and as a consequence we’re seeing more homeowners in some markets across Australia listing their homes for sale.” At the same time, Mr Raine confirms that buyer and investor enquiry is also stronger than this time last year.

Moreover Mr Raine advises that the full benefits of the Reserve Bank’s decision to cut interest rates in November and December 2011 are yet to filter through to the property market. “The property market is a slow moving boat and it takes time for macroeconomic factors such as interest rates to flow through,” he said.

In an interesting twist, leading financial comparison website www.ratecity.com.au is urging borrowers to demand their own personal rate cut from their lender. Damian Smith, RateCity’s CEO, said borrowers could trim more than 1% off their variable home loan rate if they asked for a discount. “We’re seeing lenders offering discounts of up to 1% off their standard variable rates for basic home loans and many lenders – including the big four banks – have said they are willing to negotiate to retain their share of the home loan market,” said Mr Smith.

Away from interest rates, and owners of premium properties should take note that increasing numbers of the world’s expatriates are looking to head Down Under than anywhere else in the world. According to the world’s largest survey of expatriates, the HSBC Expat Explorer, more expats are attracted by Australia’s healthy outdoor lifestyle, friendliness and work/life balance. And once in Australia, HSBC states that expatriates are more likely to lengthen their stay or settle permanently.

Despite the earning potential being less in Australia, expatriates around the world selected Australia as the top destination for their next assignment, out-ranking other markets including the US, Singapore, Hong Kong and Canada. Of those surveyed, 71% chose Australia because it was perceived to offer a better quality of life compared to expatriates who chose the US and UK based on the perceived financial gain (54% and 55% respectively).

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agent and Glenelg Property Management Experts.

It angered pundits and mortgage holders alike, but Angus Raine, CEO of Raine & Horne, says the decision by the big banks to hike up variable interest rate mortgages is not the end of the world for the Australian real estate market.

“There is still more than enough good news around for the Australian real estate market,” says Mr Raine. “A rate rise is never good news for those with a mortgage or aspiring first home buyers.”

“However market sentiment is stronger than this time last year and as a consequence we’re seeing more homeowners in some markets across Australia listing their homes for sale.” At the same time, Mr Raine confirms that buyer and investor enquiry is also stronger than this time last year.

Moreover Mr Raine advises that the full benefits of the Reserve Bank’s decision to cut interest rates in November and December 2011 are yet to filter through to the property market. “The property market is a slow moving boat and it takes time for macroeconomic factors such as interest rates to flow through,” he said.

In an interesting twist, leading financial comparison website www.ratecity.com.au is urging borrowers to demand their own personal rate cut from their lender. Damian Smith, RateCity’s CEO, said borrowers could trim more than 1% off their variable home loan rate if they asked for a discount. “We’re seeing lenders offering discounts of up to 1% off their standard variable rates for basic home loans and many lenders – including the big four banks – have said they are willing to negotiate to retain their share of the home loan market,” said Mr Smith.
Away from interest rates, and owners of premium properties should take note that increasing numbers of the world’s expatriates are looking to head Down Under than anywhere else in the world. According to the world’s largest survey of expatriates, the HSBC Expat Explorer, more expats are attracted by Australia’s healthy outdoor lifestyle, friendliness and work/life balance. And once in Australia, HSBC states that expatriates are more likely to lengthen their stay or settle permanently.

Despite the earning potential being less in Australia, expatriates around the world selected Australia as the top destination for their next assignment, out-ranking other markets including the US, Singapore, Hong Kong and Canada. Of those surveyed, 71% chose Australia because it was perceived to offer a better quality of life compared to expatriates who chose the US and UK based on the perceived financial gain (54% and 55% respectively).

This blog post is brought to you by Raine & Horne Glenelg your Glenelg Real Estate Agent and Glenelg Property Management Expert.

Moving inter-state or from country to country is harder than moving round the corner in the same suburb, or to another suburb in the same town, which is one of the reasons most people don’t move far when they move house.

Some people lose money, especially if they move from an upwardly mobile area to one where prices don’t change much, and find themselves unable to buy back into their original location if they change their minds. What steps can they take to make this process more financially secure?

Many people like to buy their new place of residence before they make the transfer. This way they experience a smooth transition from one home to another – with the emphasis on ownership and avoidance of renting at all costs. They see no problem arising from selling their old home and cutting their ties with their old life.

While such a strategy may be organised and efficient in the short term, it doesn’t always turn out to be the most successful in the long run. Many people find it hard to carry out property inspections when they live far away. Often they give themselves too little time to find a new home. They forget that moving round the corner means that a lot of the market knowledge they need is already taken for granted. (Busy roads, proximity of services, exposure to adverse season-dependent weather conditions to name a few.) Many find that the property they bought to start with seems less desirable as their local knowledge deepens.
Others find it harder to settle into a new life than they anticipated. The schools aren’t as good as the old ones, clubs and other networks don’t exist or simply don’t seem as familiar as what they left behind, the weather is too windy, wet, hot, cold – or any of the hundreds of reasons people find for not settling into a new place that is simply not “home”.

Those who have no choice – the ones who have to stay because they have been transferred and are under contract – eventually settle in, but just as many are in a position to change their minds and many of those wish they had kept their options open.

Those who decide to move back to where they came from could have reduced the financial cost of moving by not selling their home and buying another one – only to do it all over again when they return to where they came from. In hindsight, many realise that they could have chosen to rent temporarily while they explored their new territory.

Selling up before moving becomes especially likely to cause heartache if the area left is an area of greater capital growth than the area of re-location. Buying back in becomes difficult if prices go up faster in the original location than in the new one.

Naturally, not everyone decides to move back to where they came from. Some simply realise that in the hurry to get settled they chose the wrong house or the wrong area in which to buy, that round the corner or in the next suburb would have been more convenient, more appealing, more likely to go up in price.

Of course, retaining a home, renting it out and eventually selling it at a distance poses its own set of challenges. But many people find it’s the conservative option – the one more likely to maximise financial success and offer the greatest number of options further down the track.

This blog post is brought to you by Raine & Horne Glenelg your Glenelg Real Estate Agents and Glenelg Property Management Experts