Choices Newsletter January 2012

Hello

We head into the 2012 with some uncertainty about what lies ahead, with the risk of another recession building in the United States and European Union.

Amid this uncertainty comes the good news of interest rate cuts. When the Reserve Bank gave us the early Christmas present of a 25 basis point rate cut, it marked the first back-to-back monthly cut since April 2009. The December reduction alone will save the average mortgage holder – with a $300,000, 25-year mortgage – about $47 a month. With more interest rate cuts predicted in the coming months, this will surely help us start 2012 with a smile.

In this issue of the newsletter we have top tips for first home buyers buyers and look at the topics of home valuation and renovating to sell. We review Richard Branson’s book “Screw business as usual”

Do you have a story to share? Email it to homeloans@multi-choice.com.au and the top story will be published on our website.

Enjoy this newsletter and feel free to pass it on to family and friends.

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THE YEAR AHEAD

With so many mixed messages going around about the state of the economy, we thought it was time to look at what the statistics tell us.

Here’s a round-up of the latest research on the Australian property market (sourced from SQM Research and Genworth’s Home Grown Mortgage Industry Perspectives report)

Australians remain better placed to cope with their debt levels than borrowers in many other countries. 45% of Australian borrowers are overpaying their mortgage, compared to an eight-country average of 26% (across Canada, India, Ireland, Italy, Mexico, the UK and the US).
The typical borrower in 2012 is expected to be refinancers and upgraders, with first homebuyers and investors remaining cautious.
In the past year, WA has seen the largest growth in lending, then QLD, followed by VIC and NSW, with SA and TAS having seen a drop in home lending.

Of the capital cities, Sydney stands out as a being on track for house price growth of between zero and 4 per cent by the end of 2012, factoring in no interest rate change.

The statistics show us it’s not all doom and gloom, with the health of the property market varying from suburb-to-suburb and state-to-state.

As your mortgage broker we would be happy to speak with you in person about any lending issues you may be concerned about for the coming year.

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TOP 10 TIPS FOR FIRST HOME BUYERS

Here are some important tips to help avoid the most common traps:

1. Work out how much you can afford to spend before you even look, and do not waste time and energy looking in the wrong suburb — because you may end up biting off more than you can chew. Set your price limit and only look at apartments or homes advertised within your price range. Look at as many properties as possible in this price range to get an idea of what you can afford.
2. Check with your Multi-Choice Home Loans broker what loan product suits your needs — especially your borrowing limit!
3. When your broker works out the best home loan for you, ask to be advised of the ongoing payments, especially in the fine print, for monthly service fees and other charges.
4. If you are worried about interest rate rises, you can split your loan between variable and fixed rates and have the best of both worlds.
5. Instead of monthly home loan repayments, rather make fortnightly payments, thereby saving thousands on the mortgage.
6. Remember a honeymoon rate loan with a low start-up interest rate may not mean you will be paying less for your property in the long term.
7. Your home loan repayments should not destroy your lifestyle. Eating peanut butter sandwiches for dinner for the next few years is no fun.
8. Make sure there is some financial room to move if rates rise and be prepared for the monthly repayments to rise and fall during the life of your loan. If you keep paying the same amount each month or fortnight if rates fall, you pay off your loan quicker by decreasing the principal loan amount that you owe.
9. The best step to take in the search for your first home is to get a pre-approved home loan in place, which your Multi-Choice broker can provide. You then know exactly what price you can afford to pay for your new home.
10. If you are looking at buying a new home, carry out due diligence and confirm what is included in the total price.

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PUT A PRICE ON YOUR HOME

How do you go about finding out the true value of your home? You might not want to go to the expense of hiring a qualified property valuer, but you are worried about the accuracy of relying on market appraisals from real estate agents or online property price reports.

Your choice should largely depend on what you want the valuation for and how much you are prepared to spend. A professional valuation by a qualified valuer will give you the most accurate indication of what your property is worth but it will cost you a few hundred dollars. In many situations this might be a worthwhile investment, such as if you are trying to decide whether to sell or refinance and you need a clear picture of your options. Qualified, independent valuations are also expected by most lenders if you are borrowing to buy a new property, refinancing or want to access the equity in your home.

By comparison, market appraisals from real estate agents and e-valuations cannot be relied on for their accuracy but they are useful in some situations, such as for increasing your market knowledge of property prices and providing you with a price estimate at little or no cost.

You may decide that you want to use a combination of the following options for figuring out what your property is worth.

Compare prices
Compare your property with recent sales in the area and keep an eye on what comparable properties have sold for. Make sure the properties you compare with have similar features like the same number of bathrooms and bedrooms.
E-valuations
There are many websites offering automated property valuations, some of which are accurate and others not. Choosing a decent website can be a bit of a lottery so it pays to stick with reputable sources like RP Data, Australian Property Monitors and Residex and look for reports that give information about comparable sales in the area or the historical sale prices of the property.
Real Estate Agent Appraisals
Estate agents often provide free market appraisals of what they believe the property will sell for. In many cases you can rely on an agent to give you a decent estimate but keep in mind that some agents might be over-pricing to get the contract or under-pricing for a quick and easy sale.
Licensed valuation
A comprehensive valuation includes a thorough internal and external inspection of the property that takes into account the property’s unique attributes. This is combined into a report that includes recent comparable sales in the area and prevailing market conditions.

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RENOVATE TO SELL

Renovation is one of the ways you can differentiate your home to attract buyers in a slow market, but you need to do your homework to ensure that renovating before you sell is worth the time, effort and money.

Renovation, whether major or minor, is no guarantee that you’ll be able to ask more money for your home. It’s important to know what to renovate so that your home appeals to a large number of buyers, and that the renovations won’t cost you more than what they’re worth to the value of the home.

Is it feasible?

Knowing how much you should spend is all about research. A good starting point is to estimate how much your home is worth now versus what it could be worth when renovated. Look at other properties that are already renovated and are similar in terms of building style, number of bedrooms and block of land – this will give you an estimated sale price.

Take your estimated sale price and subtract your expenses and expected profit in order to work out your renovation budget. Get some quotes on the kind of work you are thinking of having done and make a decision about whether you can do a decent renovation job for this amount.

Overspending on a renovation will eat straight into your potential profit so it’s important to be clear about how much the work will cost and whether it will be more or less than the value gain.

Will it appeal to buyers?

Focus on renovations that appeal to the majority of buyers such as work done to the kitchen and bathroom. Renovating to sell is a business decision so opt for a neutral look that will appeal to more people rather than making choices based on personal preference. Visit display homes, look at magazines and talk to real estate agents to get a sense of what the current ‘look’ is in home presentation.

The more labour you undertake yourself, the less risk there is of overcapitalising, so be prepared to get your hands dirty with jobs you can do yourself.

Renovate to highlight your home’s best features, focusing on appearance rather than function. If you have a choice between replacing the hot water heater or re-painting the house, for example, it’s the new paint not the water heater that will impress the buyers.

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BOOK REVIEW

Screw Business as Usual
By Richard Branson

Can we bring more meaning to our lives and help change the world at the same time? Richard Branson, at his brilliant and motivating best, reveals how with his exciting new vision for the future. It is time to turn capitalism upside down – to shift our values, to switch from a profit focus to caring for people, communities and the planet.

With inspiration for everyone, Screw Business As Usual shows how easy it is for both businesses and individuals to embark on a whole new way of doing things, solving major problems and turning our work into something we both love and are proud of.

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