4 mortgage charges to be aware of
Whenever you carry out a home loan rates comparison, you’ll need to take all sorts of different factors into consideration. From the interest you’ll be expecting to pay, to the term of the mortgage. These are all features that can have an impact on your final decision.
There are also certain charges you will need to bear in mind. These could add a significant amount onto your mortgage repayments, which is why it pays to have all the information to hand before making a financial commitment.
Here are just four of the fees you’ll need to be aware of.
Lender’s Mortgage Insurance
Lender’s Mortgage Insurance, or LMI as it’s often known, is a form of insurance that your lender will take out to cover itself in case you default on your loan. The Australian Securities and Investments Commission (ASIC) recommends that you save at least 20 per cent of your property’s value as a deposit to avoid paying LMI.
The Insurance Council of Australia revealed that as many as a fifth of mortgages are insured through a LMI provider, so it’s a relatively common cost for you to be aware of.
You might also be charged an establishment or application fee by your lender, which is designed to cover the cost of setting up your home loan. Some companies will waive this charge, while others will expect you to pay it when you make your application.
There might come a time when you decide to move on from your current lender, and see what else is available. In this case, your current lender may charge you an exit fee if your current deal hasn’t yet come to an end.
However, this is only the case if you took out your original mortgage before July 1, 2011. ASIC advises that lenders are no longer allowed to charge exit fees on new products.
Early repayment charge
If you’re in the position to repay your mortgage before the term officially ends, it’s possible that you will be penalised by your lender. This may be charged as a set amount or a proportion of your remaining balance.
You need to be sure of the terms and conditions of your mortgage before you sign on the dotted line, as expenses such as this could prove to be unexpected. Discuss your requirements with us before deciding which product makes the right financial sense for you.
Protect yourself from property scammers
Property is a brilliant asset to have. Unlike other classes, it doesn’t just build wealth – it puts a shelter over your or your tenant’s head. Investing in bricks and mortar is an incredibly popular choice, whether you’re a first home buyer just
starting to figure out how much you can borrow, or a seasoned investor looking for the next big growth hotspot.
However, the sheer popularity of real estate has brought with it unscrupulous individuals hell-bent on illegally parting you with your capital in the most efficient way possible. The Australian Competition and Consumer Commission
reports that in one year, Australians lost $229 million to scams, with dating and romance scams as well as investment schemes accounting for only a few reports, but the majority of losses.
So how can you make sure you don’t fall victim to these professional swindlers?
Stay aware –
Knowledge is power in property. Whether it’s knowing whether a piece of real estate is a lemon or realising the person you are dealing with isn’t quite above-board, making sure you are in the know is integral to making sure you aren’t
wasting your mortgage repayments on an illusion.
So how can you spot a dodgy investment scheme? They come in many forms, but the majority of scam attempts came via the phone, according to Scamwatch. If you find yourself talking with an “investment expert” who you don’t recognise, with a once in a lifetime, low risk offer, your alarm bells should be ringing.
Are you a target?
Everybody from young Aussies to retirees invest in property, so everybody is a target to scammers. However,
Scamwatch tells us that 40 per cent of scam reports come from those who are over 55. Perhaps these criminals consider retirees to be easier targets or just want to access their superannuation capital. In either case, older people do seem to be targeted more, so be extra careful if you are in this age bracket.
However, that isn’t to say that young people aren’t targets too. People who are new to the property market and don’t have the right mortgage advice may be tempted to borrow large amounts of money to invest in a “low risk” property
venture. This kind of mistake could cost you dearly, so ensure you work with us, your trusted mortgage experts, to keep yourself safe.
What’s the key to quick capital gains?
Buying, renovating and selling a home quickly can be a fast-track to property investment success. On the flip -side however, mismanagement of your investment or buying without knowing the lay of the land, can quickly change your dream into a nightmare. To help make sure your real estate doesn’t cause you night terrors, we’ve whipped up a quick guide to the basics of ensuring quick capital gains.
Don’t over-do the renovations Throughout Australia the number of home renovations has trended sharply upwards in the in recent years, according to a Housing Industry Association (HIA) report. These increases may be helped along by continually increasing property prices, which encourage people to access their increasing equity to renovate. Fantastic as this is, if you’re buying and selling quickly for profit, hiring professionals to renovate may blow your budget and cause the amount of your investment loan to skyrocket. A more affordable option may be to undertake DIY renovations before sale – a practice which the HIA indicates has also been on the rise.
When doing so, it’s important to focus on cosmetic renovations such as painting or repairing visible damage rather than expensive structural altercations. These small improvements could be the key to unlocking your home’s full resale potential without breaking the bank.
Research the area, then research some more It is absolutely essential that you thoroughly research the area and market that you’re buying in. Don’t assume that growth in the past equals further increases. Instead of looking at trends in the area to predict the future of the market.
For example, buying an apartment in Sydney may have once been the ultimate investment purchase, but the recent construction boom has increased its supply. A larger apartment supply may eventually lead to a slowing of the markets value growth rate, or even a decrease in price – not the ideal situation for investors. For this reason, looking outside of central suburbs may be a more prudent investment, netting you a better return at a lower purchase price. One such suburb is Knoxfield, a small area less than an hours driving east of Melbourne’s city central. This area has an affordable median house price of just over $550,000, and experienced capital gains of almost 25 per cent last year, according to a report by the National Australia Bank, compiled using CoreLogic RP data.
Grab a cheapy
CoreLogic also recently found that over 53 per cent of investment-owned properties are valued at under $500,000. The reason behind this statistic may be that buying and selling at a lower price will make the property accessible to a larger portion of Australian’s, than say a $3 million dollar cliff-top mansion would be. By opening the sale of your property up to a larger number of potential buyers, you may increase its demand. This could mean more interested buyers, more competition on auction day and a higher sale price. These are all factors that should make it easier to sell your property for more than you purchased it – ensuring your mortgage repayments aren’t for nothing. As you can see there’s endless criteria to consider when purchasing an investment property, so securing your finances may fall by the wayside. We have extensive experience helping investors in exactly this situation. So why not use our vast experience and knowledge to help secure the most suitable loan product for you – without the hassle.
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Information included in our newsletters is for general information purposes only and must not be considered financial advice. You should seek independent professional advice in relation to financial, taxation and legal matters relevant to your individual circumstances.