A recent Archicentre survey found that nearly 75 per cent of homeowners are planning to renovate over the next two years.
Renovating is an excellent way to improve your property, either for personal reasons or for resale. Whatever your reasons, effective finance is a key component of a successful renovation project.
The type of finance you need will really depend on the scope of your renovation – replacing your old bathroom with a modern one is vastly different to building an extension, for example – but having some home equity built up will certainly help.
For smaller projects, a home loan top up may be suitable. A top up simply extends your existing home loan by a small amount.
For larger projects you may wish to access your equity, either to secure a separate construction loan or to refinance your current loan to cover the new work.
Either way, the assistance of a good mortgage broker can help you to ensure your finance is structured to suit your specific renovation project.
If ongoing low home loan interest rates sound like music to your ears, then Herston Economics chief economist, Clifford Bennett, might just be singing your song.
Mr. Bennett, the only economist to publicly predict interest rates would be kept on hold by the Reserve Bank of Australia (RBA) in February, believes that interest rates could well stay under 5 per cent for the next 10 to 15 years.
He believes changes to financial markets brought about by the global financial crisis mean that interest rates will not rise significantly, with high competitive price pressures instead the regulator in the economy.
However Mr. Bennett is walking a lonely path, with most economists still predicting interest rates will rise above 4.5 per cent this year alone, and indeed the RBA itself has indicated it does not feel that interest rates have finished rising.
For people holding or planning to have a mortgage, it’s important to plan for significant rises, even if these never happen. Mortgage brokers generally agree that a good initial home loan package plus ongoing monitoring of your situation against the options in the home loan market, is the best approach.
Property Investors might be getting most of the column space but people upgrading – or simply moving on to a new place – are an active group in the property market too, says Gosnells mortgage broker, Nona Hoban.
“The recent state of the property market, combined with still-low interest rates, has encouraged a number of people to move on or up,” says Nona.
“I’ve found a number of buyers in this group are unsure about what to do with their home loans when they do decide to move to a new property.”
According to Nona, the term ‘bridging loan’ was considered “a bit of a dirty word” a few years ago, leading to a lack of awareness and understanding by today’s buyers.
“But for some people a bridging loan is useful,” says Nona.
A bridging loan is simply a loan that covers both properties for a period of time, says Nona.
“It gives you the freedom to navigate the buying and selling process on both your new and old property, without having to worry unduly about the timing of it all.”
That said, Nona says, it’s still best to complete both transactions as quickly as possible, to limit how much interest you accrue over the course of the bridging period.
Oakleigh mortgage broker Alex Shumsky has more than a decade of experience in the finance industry both with major banks and as a mortgage broker, during which time he has developed a reputation with both clients and lenders as a provider of quality service. During his career he has assisted clients to secure in excess of $250 million, and in late 2006 was nominated for industry body the Mortgage & Finance Association of Australia’s Excellence Awards in the Broker of the Year category.
Please view the below video to see Alex’s 5 Top Tips to Getting a Better Home Loan Deal.
Despite interest rates remaining on hold at the RBA’s February meeting, Everton Park mortgage broker Nathan Reck believes that now is the time to make sure you are prepared for ‘anything that comes’.
And while interest rate changes are the most obvious thing to ‘be prepared’ for, Nathan says that isn’t the only thing people with home loans should consider, not by a long shot.
“I used to be an occupational therapist and it really opened my eyes to what could happen to you in the course of everyday life,” said Nathan.
“Think about what has been in the news recently, or what has happened to friends, family, acquaintances.
“If something unexpected happened to you – say you slip on a wet bathroom floor and seriously injure yourself – could you cope with your mortgage?”
No matter how negative it might seem, Nathan says that anyone with or considering a home loan needs to plan that loan with dire events in mind.
“Strange things happen every day so it’s only sensible to look at your home loan and consider how it can be best set up to help you overcome any potential problems,” said Nathan.
“And you need to consider insurance as well, it’s an important aspect of taking on a big financial commitment like a home loan.”
The Housing Industry Association says new home sales fell by 4.6 per cent in December last year, due to rising interest rates and a reduction in Government subsidies.
HIA chief economist Harley Dale said it remained to be seen whether residential construction will recover past 2010.
“It is clear that momentum is coming out of new home sales as the stimulus from first time buyer related activity recedes,” Mr Dale said.
“Without a broad based recovery in private sector new residential construction, we will face undue upward pressure on existing home values and unrelenting tightness in rental markets.”
Loan Market Executive Director Sam White said people looking to take out a construction loan should be aware that the bank will draw down your loan in five stages.
Loan Market Woodville mortgage brokers, David Parkinson and Roger Smith have taken on a new business challenge, to provide more assistance to their existing client database and potential new customers.
Mortgage brokers by trade, the men are pleased to announce their foray into the real estate world by opening Ray White North Adelaide. The motivation for expanding their expertise was fuelled by existing clients who wanted to entrust David and Roger with their real estate business as well as their lending business.
The new Ray White North Adelaide office is strategically located on the corner of O’Connell Street and Brougham Place. In such a visible location the office has had a complete modern fit and has 3 splash touch screen displays installed to maximise walk-by traffic.
“The profile of the business has resulted in a significant amount of positive feedback and the level of walk-in business is well beyond expectation,” Roger said.
David and Roger are looking forward to growing a unique and successful business in the North Adelaide area.
On top of that, 2010 is a year for property investors anyway, according to Sheryle.
“All the predictions for the Australian property market right now are for capital growth over the coming decade,” said Sheryle.
“So if you are considering investment, and have the financial resources available to you, now may be an excellent time to get into the market.”
Sheryle said that you may be surprised just who does have the financial resources to invest in property.
“Even if investment is a dream you don’t think you can live, you should take the time out to investigate what you can do within your personal limitations, sometimes there are options out there that you don’t know about that can make investing possible,” said Sheryle.
“Perhaps you just need to consider where you invest, I have helped many people successfully invest interstate so that could be an option for you too.”
The Reserve Bank of Australia (RBA) has today left the official cash rate on hold at 3.75 per cent, a move that has come as a surprise to many economists and homeowners who were expecting a 25 basis point rise.
Despite the shock, Loan Market Group Chief Executive, Sam White, said that keeping interest rates on hold this month was the right move, leaving the RBA free to assess the impact of last year’s three rate rises in October, November and December.
“What they’re [the RBA] trying to do is assess the impact of the previous rises. Australians are also coming back from holidays. The RBA will also be assessing how much credit card debt has built up over the festive season,” he said.
But Mr. White said mortgage holders shouldn’t get too comfortable after today’s decision and should instead look to the future.
“I think most mortgage holders are expecting a tightening of the cycle and for more rate rises to come this year, possibly as much as 0.5 per cent above the current level,” he said.
At this stage, no banks have moved to make any changes to interest rates: the NAB guaranteed prior to the RBA meeting that it would not increase home loan interest rates outside of any RBA movement.
Central Coast mortgage broker, Cathy Mosdell, says making additional repayments on your home loan may save you a bundle of money at the best of times.
But when it really counts is when times get tougher and interest rates rise.
“Everyone is expecting a few interest rate rises this year, so it’s important to have a plan in place to cope with that,” said Cathy.
“One of my favourite ways to reduce the effects of interest rate rises is to make sure my clients have a loan structure in place that enables them to make additional repayments,” she said.
“This means they can reduce the size of their debt faster than making just the required repayments, so that when interest rates do rise, there is less debt to charge interest on.”
Although Cathy does not recommend refinancing for everyone, she says in certain situations it can be very beneficial.
“The key is to review your home loan regularly so that you know where you stand, what your options are and what move is the right one for you financially.”
Source: Loan Market, Lending Central
Here a list of Mortgage Brokers on the Central Coast:
