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December 2007 - Summer |
Economic round-up
Time to prepare for the year ahead
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With Christmas just around the corner most of us have been busy gift shopping, socialising and looking forward to a well-earned break.
As the New Year approaches, borrowers can take heart that interest rates remain stable for now. And while it's too early to say what may happen to rates next year, this is indeed positive news as we enter the expensive festive season.
Keeping costs down is important to each and every property owner, so you're sure to find this issue's co-ownership feature interesting if you're looking to break into the property market or thinking about purchasing an investment property.
And for those looking for a sea or tree change - and with an eye for investment - we also give the low-down on how to go about buying your holiday home.
Finally, for those of you who are preparing for retirement we look at how you can unlock your property's equity with a reverse mortgage and free-up cash flow.
Whether you're looking for mortgage or business cashflow advice, short term finance, or would like to chat through property investment, feel free to give me a call to discuss your finance options. Have a very merry Christmas and a safe and happy New Year.
Warmest regards,
Karina Wolfin
Southern Lending
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Economic round-up
Time to prepare for the year ahead
Australian borrowers can breathe a sigh of
relief as the RBA's December announcement
confirms that interest rates will remain stable
at 6.75 per cent.
But for some Australians, mortgage stress
remains a major concern, with the latest Real
Estate Institute of Australia home loan affordability
index indicating that affordability is at its
lowest in 22 years. On average, nearly 37 per
cent of a family's income was spent on home
loan repayments in the September quarter.
Despite the pain felt by some homeowners
the good news is that the Australian economy
continues to thrive. More people are in work
than ever before, with unemployment now
at a 33 year low according to the Australian
Bureau of Statistics (ABS).
While the current strong growth is positive
it does however increase concerns over
inflation - or an overheating of the economy
- which can lead to spiralling prices and in
turn further rate rises. And the current mood
of most economists is that we may see further
rate rises in 2008 if inflation continues to
climb.
To make sure you're not caught unprepared
in the event of an interest rate rise early next
year, planning your finances can make the difference
between struggling to pay your mortgage
and feeling confident and secure about
your household budget. The holiday period
around Christmas and the New Year is the
perfect time to sit down and set some goals
for the year ahead as well as contingency
planning should you see problems looming.
If increasing rates are ripping a hole in your
finances for example, it's well worth considering
locking in your mortgage at a fixed rate or
even switching your current home loan to a
lender offering a better rate.
And remember, if you do overspend during
the holiday period, you can always consolidate
your personal loans and credit card
debts into your mortgage.
Planning remains the key to managing your
mortgage - so give your broker a call if you
have any questions or concerns about your
current loan, or if you're looking to expand or
even buy an investment property in the New
Year.
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Join forces to buy your home
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Co-ownership might just be the
solution you're looking for to gain
a foothold in the property market
With rising interest rates and sky-rocketing
property prices pushing affordability to unmanageable
heights for many aspiring home buyers,
buying a property may seem like a distant
pipedream.
If the prospect of owning a home seems to be
slipping from your grasp, take heart - co-owning
a property with a family member or close friend
might be something for you to consider.
Whether you're a first-home buyer or seasoned
investor, co-ownership has become a sound
option for two or more unmarried people looking
for a step-up onto the property ladder.
It's a great way to not only split your mortgage
costs but also share in the different responsibilities
and expenses of purchasing a property.
Fool-proofing your deal
Whilst the idea of co-owning a property might
appeal to some cash-strapped buyers, there are
a number of legal factors to consider before you
sign on the dotted line.
Most legal experts advise co-buyers to sign a
"co-ownership agreement" or a legal document
that outlines the rights and obligations of each
person with a stake in the property.
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To make sure you're covered for any legal hiccups
pertaining to your claim on the property,
the agreement rubber-stamps each buyer's
responsibility to the purchase, including rules on
splitting mortgage repayments, dividing operating
expenses, and the conditions of sale should
one party wish to sell out.
Another factor to consider is the amount of
money your lender is willing to fork out for your
purchase. Tougher rules may apply to tenantsin-
common purchases - so remember to read
the fine print, and consult your mortgage broker
about your financing options!
Lastly, tenants-in-common are often required to
be co-borrowers or guarantors for each others'
loans - meaning both parties will be liable for repaying
each other's loan in the case of a default.
Although each party's liability is limited to the
value of the property, lenders may charge
penalty interest payments on the loan if repayments
are not met - resulting in a possible
forced sale of your property.
Ensuring your agreement is well planned out
is essential to making co-ownership fool-proof
for you and your co-buyer - so make sure you
seek professional legal advice and talk to your
mortgage broker to get the full picture.
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Keep your garden in shape this summer -
the eco-friendly way
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With water becoming an increasingly precious
resource, there's never been a better time
to be water wise - especially in the garden.
Keep your garden in top form this summer
with these eco-friendly tips:
Think outside the square: Decorate your
garden with pavers, pebbles, and urns in
place of a water feature or plants.
Know your soil: Soil moisture probes can tell
you whether your garden needs water - grab
one for around $10 at your local hardware
store.
Be water smart: Getting water straight to
your plants' roots is important and easy with a
home irrigation system. These affordable drip
systems are easy to install and deliver water
directly to where it's needed most, at the right
absorption rate.
Keep the moisture in: Covering your garden
with mulch prevents evaporation and keeps
your soil damp for longer.
Shade your garden: Vines such as bougainvilleas
and wisterias are great heat survivors
while helping to shade your garden and
reduce the drying impact of the sun.
Get with the times: Think about improving
your garden's long-term sustainability - look
at landscaping ideas that are appropriate for
the climate to create a healthy, water-wise
landscape.
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Buying your home away from home
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Not only can a holiday home give your family a whole
new lifestyle, it also has the potential to be a very
effective investment.
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If you're on the hunt for holiday accommodation complete with the comforts of
your own home, then buying a holiday property may not only be a good financial
investment, it's also a great way to boost your lifestyle!
But before you begin your holiday home hunt, stop and consider whether returning
to the same place for holidays year in, year out, is for you. If it is, then a sea
or tree change investment property might be your ticket to paradise!
One of the most important issues to consider when choosing your property's
location is its distance from your own home.
If you have a young family, for example, it's probably easier to buy in an area that
is within driving distance of your home - ideal for short weekend escapes from
the city!
For a young professional couple or empty nesters with time and money, an interstate
holiday hide away may be more manageable.
If you're keen to explore the option of a holiday home, you should consider
getting financial/tax advice, see your broker for recommendations. Here are
some other key considerations:
The Pros
- Earn rental income by leasing out your property
- Claim tax deductions for the periods when you rent out your holiday home
- Purchasing the property can be a long-term investment to set you up comfortably for your retirement
The Cons
- Rental returns may fluctuate in line with the holiday season
- Regional properties may take longer to sell than their city counterparts
- The cost of property management and maintenance may be high
Buying a holiday home can be rewarding financially as well as positively impact
on your lifestyle. Speak to your broker to discuss which funding options best suit
your needs and aspirations.
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Reverse mortgages:
Making equity work for you
If you're retired and looking to
better your lifestyle, unlocking
your property's equity can set
you up for life!
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Many Australian retirees are increasingly finding
that they have hundreds of thousands of dollars
tied up in their homes and are looking for ways
to make their cash go the distance for a comfortable
retirement.
If you're retired, asset-rich but cash-poor, reverse
mortgages may be an effective option to release
the equity in your home - allowing you to tap into
cash that is otherwise tied-up in your property.
Here's what you need to know about reverse
mortgages:
Working your equity
Reverse mortgages typically allow you to borrow
money against the equity in your home. You can
choose to receive the cash in a lump sum, a
regular stream of income, or a combination of
both to suit your needs.
Contrary to traditional home loans, borrowers will
not have to make regular repayments on reverse
mortgages since the loan is repaid from the
borrower's estate upon death, usually after the
home has been sold.
Securing a reverse mortgage means you
continue to own your home; the lender simply
registers a mortgage over the property.
How can I get a reverse mortgage?
Unlike conventional home loans, you'll need to
be aged 60 and above to qualify for a reverse
mortgage. And if you're thinking of getting a
reverse mortgage with your partner, then both of
you will be required to be at least 60 to apply.
Is my property eligible?
A residential property will typically qualify for a
reverse mortgage even if you still have a mortgage
over the property; some lenders will also
lend against an investment property.
Reverse mortgages can significantly improve a
retiree's lifestyle through giving access to equity
locked in their home - typically their biggest asset.
I'd you're interested to learn whether you're
eligible and how this option can help, give your
mortgage broker a call today.
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Disclaimer. This newsletter does not necessarily reflect the opinion of the publisher. It is intended to provide general news and information only.
While every care has been taken to ensure the accuracy of the information it contains, neither the publishers, authors nor their employees,
can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this publication can be reproduced or
reprinted without the express permission of the publisher. Readers are advised to contact their financial adviser, broker or accountant before
making any investment decisions and should not rely on this newsletter as a substitute for professional advice.
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