The upsides and downsides of home loan debt consolidation

All your debts in one basket – Why home loan debt consolidation could be the right move.

A lot of small debts can balloon into one big headache. A simple way to get things under control could be to refinance your home loan to consolidate debt. So – is it right for you?

What it is

Simply put, debt consolidation is combining all your debts – credit cards, car loans etc. – into one single debt with a single monthly payment. When they are individual loans each of them has their own specific interest rates, conditions and balances – so rolling them all into one loan is both efficient and easy to manage. 

But before you head down the debt consolidation route, here are some of the upsides and downsides to help you make a well-informed decision.

The upside

  • Instead of several times a month, pay once. Managing your debt becomes a lot easier when you pay down all your credit cards – as well as any interest you owe – with one repayment every week, fortnight or month over a fixed amount of time
  • One fixed rate and term. This gives you certainty over payment amounts and keeps you disciplined in paying down debt
  • Less to pay each month. You may end up paying slightly more overall but stretching the term on your loans means that you could well be spending less each month.

The downside

There are always pros and cons to any loan decision. Here are some of the cons of using a home loan for debt consolidation:

•    You could accumulate more debt. When you consolidate debt, you free up credit. This might make you think you can spend more and, as a result, you end up with even more debt than you had before

•    Pay more overall. A loan with a longer term can help you reduce your monthly repayments, but a longer term means more interest overall

•    Your credit score could take a hit. In the event you don’t keep up with the single monthly repayments on your loan, you could end up hurting your credit score or be in serious financial hardship.

If you’d like more information talk to us today about how we may be able to put you in touch with a lender that can help you consolidate your debts. 1300 252 088.

Disclaimer: Original content source: Pepper Money. It is designed to provide you with factual information only, and it is not intended to imply any recommendation about any financial product(s) or to constitute tax advice. If you need financial or tax advice you should consult a licensed financial or tax adviser. The information in the article is believed to be reliable at the time of distribution, but neither Pepper nor its accredited brokers warrant its completeness or accuracy.

Buying in Partnership

How would you like to double your deposit and double your income to buy your first property? Sounds pretty good doesn’t it? That’s the reason why many young homebuyers are now working together with a partner, friend or relative to break into the property market.

Although there are some excellent benefits to entering a property partnership, there are some pretty nasty horror stories out there too – so you need to make sure you protect yourself against the worst.

Make sure you have similar goals for your property purchase.

Do you both agree on how long you would like to keep the property for? Do you want to rent it out, or will you be living there together? Make sure everyone is on the same page before you enter into any contracts.

Buy with someone who is at a similar stage in life.

If you buy with a family member who has a baby on the way, you might be asking for trouble. Likewise, buying with a sibling who is too young to appreciate the importance of keeping up financial commitments could be just as much of a recipe for disaster.

Take a moment to check your financial compatibility.

You will be responsible for the loan if the other party becomes unable to pay, so take the time to have some open discussions about money, and make sure you are both equally committed to paying things on time and keeping track of the bills.

Decide if you want to be housemates.

If you plan to live together in the home, make sure you both agree about things that could cause arguments such as having pets in the house, allowing partners to sleep over, housework and other potentially touchy subjects.

Get Legal Advice.

Find out about your options legally if something was to go wrong, and decide whether you want to be Joint Tenants, or Tenants in Common. This might depend on whether you will pay an equal share of the deposit and loan repayments.

Create a formal agreement.

Get a formal agreement drawn up that covers as many issues as you can think of. Hopefully you won’t have any problems, but it might be helpful if you already agree on the solution ahead of time.

Property partnerships can turn into nasty legal battles when parties don’t agree on important issues, such as whether or not to sell the property. If you can thrash out some of these issues now you will save yourself a lot of worry in the future.

Keep records of spending.

Make sure you keep it even and try to keep records of who paid for what, just in case you have problems down the track.

Hopefully your property partnership will be a very positive experience, and if you follow these steps you should be well on your way to being a great team.

Some Common Home Buying Blunders

Your home is likely to be the biggest purchase you make, so it’s something you want to get right.

Mistakes can be stressful and costly. Here are the biggest ones buyers make and some tips to help you avoid them.

1) Letting your heart rule your head.

It’s often easy to be dispassionate about an investment property but when it comes to your own home, emotions can run high.

Buyers often make the mistake of falling for features in a home or loving a certain location, only to find, once they move in, they have compromised on what they really need.

Arm yourself with a list of non-negotiables – the features you simply must have now or soon down the track, such as extra bedrooms for a growing family, office space for a home business or proximity to public transport.

If a property doesn’t tick all of your must-haves, keep hunting.

You should also decide whether or not you want to renovate or have a lot of time for maintenance. Heritage properties can win over hearts but often require deep pockets and lots of upkeep. Similarly, a fixer-upper in your price range and preferred location may end up being a money pit you can’t really afford.

Look beyond fancy fit-outs and styling – the furnishings will go with the vendors.

Stick to the buying basics – location, price, layout and condition – to decide if the property is right for you.

2) Believing the selling agent is working for you.

Real estate agents are paid by the vendor with commission from the sale. The higher the sale price, the more they put in their pocket.

Don’t fall for sales spiels that tempt you to spend more than you can afford or settle for a property that doesn’t meet your needs.

Some buyers are levelling the playing field by hiring their own agents to find a property and negotiate the sale. Fees for buying agents vary, but generally they charge for their time, plus take a commission from the sale. If you have no time to house hunt, it may be worth the extra cost.

3) No homework.

There is no such thing as too much research when it comes to property. You should set aside several weeks to get around to as many properties as possible, narrowing your search to three target suburbs when you are ready to buy.

Check out recent sales of comparable properties in the area and build on this research as you go, keeping in mind property prices can move fast in a boom.

You should also find out if there are any amenities and infrastructure planned for the area, such as new roads, public transport, hospitals or schools, which can boost real estate prices.

Another key question is how long the property has been on the market.

If looking for an investment, research rents and what the area has to offer tenants, such as a lively restaurant or cafe scene and reliable public transport.

4) Starting the hunt without loan approval.

Knowing how much you can afford will take a lot of stress out of your search. A pre-approved loan sets a boundary so you can focus on properties in your price range and gives you peace of mind that you will be able to move fast when you find the right one.

Give us a call on 1300 252 088 to make sure you have this all in place.

5) Buying beyond your means.

It can be tempting to stretch your budget for what seems like the right property, especially if interest rates are as low as they are now.

But rates are cyclical and what goes down, eventually goes up. If you are extending to afford a property while interest rates are low, you are going to struggle to make your mortgage payments when they start to climb.

It’s wise to calculate your repayments should rates rise by two to three per cent and build that reserve into your budget. That way, you have some comfort when the cycle eventually turns.

6) Not getting the property inspected.

According to NSW building advisory service Archicentre, only one in 10 buyers gets a professional building and pest report on a property before they buy it. Most inspections cost a few hundred dollars, a small price to pay for peace of mind on a purchase as significant as a home.

A licensed inspector can check for pests, such as termites, and building flaws or issues, such as wood rot or rising damp, all of which have the potential to cause costly dramas if unchecked.

Always ensure the sale contract is subject to getting the all-clear on the building inspection. If something surfaces, you can either back out of the purchase or negotiate a lower price to compensate for the required repairs.

7) Not getting the sale contract checked.

The contract you sign when you hand over a deposit is legally binding, so have it scrutinised by a lawyer or conveyancer.

They will check it for any sale or zoning conditions that could disadvantage you, such as restrictions, or covenants that may be imposed.

A lawyer or conveyancer can also check property documentation, such as sewer diagrams, to make sure there are no issues with any renovation or extension plans.

Your legal expert can also help adjust the contract terms for your benefit, such as negotiating a longer settlement period if required.

We only invest one hour of our time on the biggest investment of our lives – Avoiding the Money Pit

The typical home purchaser spends around 90 hours over 6 months browsing the internet, researching websites, visiting real estate agencies and inspecting no less than a dozen properties. However, we only spend a little more than one hour inspecting the home we eventually purchase. Not surprisingly, many of us discover ‘hidden problems’ after the settlement.

Purchasing a new home can be an exciting time. With the new location, more space and improved features it is easy to get caught in the moment. By the time we find our ‘dream home’ most of us are exhausted from the months of searching, the endless lost weekends, the constant disappointments of missing out or vendors just not quite meeting our pricing expectations.

The endless home viewings and burden of just one more property inspection can make it easy to become complacent with our property inspections. It can be difficult to maintain a thorough inspection process as one property merges into the next.

Before you exchange a contract of sale or sign a purchase agreement, it is always recommended that you engage a qualified inspector to conduct a rigorous building and pest inspection of your potential new home.

Why do I need these?

There are three good reasons why you should invest in a building and pest inspection report before you buy a property:

  1. You will know any hidden problems in advance.
  2. You can use the information to try and negotiate the price of the property or budget for the repair of any problems.
  3. You can engage with a specialist for advice about how any issues raised may affect the property at a later date.

Of course, the building and pest inspection reports will be only two of many things you will need to consider before buying a property however they will help ensure that the “congratulations – the home is yours!” is a happy moment.

Some Questions to ask when downsizing

• When is the right time?
• What is the right location for me?
• How much will you save and how much will you spend?
• What should I keep and donate?
• How much space do I need?
• What type of property is right for me?
• What items will I need to replace?
• How do you picture your life in your new place?
• What’s the community like?
• What are my must-have amenities?

NO rate change for the 27th Consecutive month

The Reserve Bank of Australia has announced its decision on the November cash rate. The rate would be staying the same at 1.50%.

The rate has now been the same for 27 consecutive months and many analysts believe it will remain at this rate into 2019 and possibly to 2020.

This announcement was mostly expected from the industry, with 98% of brokers believing it would remain the same, according to an industry survey.

The RBA shadow board also attached a 53% confidence that the rate would remain the same.

The RBA governor has previously said the next move of the cash rate will be a hike, however some analysts are now suggesting the environment at the moment could call for a decrease.

Michael Yardney, from Metropole Property Strategists, said, “The RBA must be a little worried with the current crisis in consumer confidence. If anything it may want to err on the side of caution and lower rates, but it is likely to take a wait and see approach.”

AMP’s Shane Oliver had said, “The fall in the official unemployment rate to 5% helped by above trend economic growth is good news.

“But the slide in home prices in Sydney and Melbourne risks accelerating as banks tighten lending standards which in turn threatens consumer spending and wider economic growth and inflation and wages growth remain low. Against this backdrop it remains appropriate for the RBA to leave rates on hold.”


How to negotiate in a softer housing market

Seller expectations are high but buyers want low prices – what’s to be done? Two real estate agents detail how to negotiate in a declining housing market.

After years of rapidly rising house prices, the recent slowdown took many people by surprise – not least those with a home to sell.

“For a while we had a situation where buyers were aware the market was dropping while sellers still assumed it was strong, so there was a big gap between their expectations,” says Anton Zhouk, Director of the Buxton Real Estate Group at Boroondara in Melbourne’s eastern suburbs.

“Now people have had time to adjust so, when it comes to negotiation, the gap isn’t quite so wide.”

Whatever the state of the market, every negotiation is based on the same premise – vendors want to receive the highest possible price while buyers want to pay as little as possible. Both, however, need to give careful thought to how they approach a negotiation when the market is in decline.

Be realistic

From a vendor’s point of view, it’s crucial that you price your property correctly from the start. The most incredible homes in the world won’t sell if they’re overpriced.

Jane Booty, Principal of Stone Hills District Real Estate in Sydney, agrees that vendors must be realistic.

“Some potential buyers are waiting for prices to fall even further so there are fewer actively looking,” she says. “They have more properties to choose from so it’s harder to convince them to pay a premium price. And the longer a property stays on the market, the less likely it is to sell at a higher price – buyers can look up how long it’s been for sale and will use that against you.”

She suggests that vendors try not to think in terms of losing money.

“Unless you bought in the last two years or so, you’re probably going to get a higher price than you paid,” she says. “And, of course, if you’re selling to buy, you’ll be paying less yourself. It can be more helpful to think in terms of the changeover price, rather than fixate on the price you may have been able to achieve a few months ago.”

Take offers seriously

If a property is on the market now, it’s there for a reason.

“This isn’t a time to be testing the market or selling a property if you’re not in a hurry,” Booty says. “If you do need to sell you should be prepared to take every offer seriously, even if it’s not at the level you were hoping for. At least enter into negotiations to see how far you can get your potential buyer to go.”

When buyers have the upper hand, presentation is particularly important.

“You need to be clear about the attributes of your home – the unique selling points that make it desirable,” Booty says. “It’s also worth spending some time and money on minimising anything that would cause concern. You don’t want potential buyers to go away with the impression that there are another five homes they’d be equally happy with.”

“In a softer market, it’s vital that you start by getting good advice on everything from pricing to presentation,” Zhouk says. “The right agent will also help you market the property effectively. This needs to be considered on a case by case basis – for example, advertising in print media may work well for some but, for others, it would be a waste of money.”

Be ready to act

As a buyer today, you’re well placed – but you shouldn’t be too complacent.

“If you see a property that appeals to you, it’s also likely to appeal to other people so you can’t afford to sit back and wait in the hope that the price will fall,” Booty says. “At least throw your cap into the ring and start the negotiation process.”

Zhouk believes that today’s buyers are in a fortunate position now that the market has settled – though no one knows for how long.

“The only way you can tell when the market’s hit the bottom is when it starts to come back up,” he says. “By then, you could be too late.”

Some tips to help get the best results from your negotiation

If you’re selling

  • Set a realistic price from the outset
  • Find a real estate agent you trust and act on their advice
  • Take extra care with presentation – you want potential buyers to fall in love with your property

If you’re buying

  • Do your research – be clear about a realistic market price
  • Have your finances in place, arrange a loan pre-approval
  • Let the agent know if you’re interested in a property
  • Don’t wait too long for a bargain – the market could turn at any time

Investing in Property with a Friend

Have you ever heard the expression, ‘no friends in business’? It’s an oldie but a goodie.

This is the attitude you should bring when considering buying property with a friend.

Many good friendships have gone under the bus, and lots of people have taken a bullet to their credit rating by not giving this decision adequate thought.

So, what are the risks involved with co-ownership, especially when you purchase with a friend?

What if one wants to sell?

One of the biggest problems with co-ownership is when one owner decides they want to sell the property, but the other owners don’t agree.

This often ends up in court, and the process can be costly and upsetting for everyone. And needless to say – the friendship probably won’t survive.

Buying could be harder in the future.

It might seem like the dream scenario to invest now with your best friend.

But if you decide in a few years to purchase a home to live in, the lender will assess your financial commitments based on the whole loan for the first property, not just the portion that you agreed to cover.

This could make it very difficult for you to get another loan.

You could be left holding the baby.

If something happens and your friend is unable to make their repayments, you could be left in the difficult situation of repaying the entire loan by yourself.

Coupled with your other living expenses, you might not be in a position to cover the whole amount yourself.

But there are some ways that you can reduce the risk, if you are keen to purchase property with a friend.

  1. Put a legal will in place. It’s important to make arrangements for what will happen to your assets if you pass away or become incapacitated.
  2. Draw up a co-ownership agreement. If you can think about any issues that might possibly come up in the future, and have an agreement in place to solve them, you’re less likely to wind up in court trying to work things out.
  3. Choose the right structure – tenants in common, or joint tenants. Tenants in common can own a different portion of the property, and they need to specify in their will who will inherit their portion if they die. Joint tenants jointly and equally own the property, and if one person dies, their share automatically goes to the other(s) regardless of the instructions in their will.
  4. Choose the right person. It’s important to discuss your financial goals and values before you enter into this sort of arrangement. You need to feel comfortable knowing that your friend will be financially secure enough to keep up their end of the bargain – otherwise you might be left trying to cover the repayments alone.

It’s important to think about your own relationships as well, if your partner is keen for you to buy a house together next year, you might want to think about how this first investment might impact your borrowing power.


Selling your House

Because selling your home in record time takes some elbow grease.

How far should you go when presenting your home for sale? Do you really have to get rid of all your family photos? Who has the time to bake a fresh batch of cookies in time for every open house?

There are some things that make a huge difference to potential buyers, and some that will just give you a headache for no reason.

If you’re a bit unsure what you should do to make your property appealing to buyers, don’t worry – just follow these 5 simple steps.

Step 1: De-clutter

It’s time to cut down on some of those kids toys, and it might be a good idea to find a temporary home for your newspaper collection. Buyers are looking for space and comfort, and nothing says ‘this house is too small’ quite like an overflowing bookshelf.

Try packing away some of the items that you don’t use very often. If you don’t listen to your CD’s very often, load them onto your ipod and pack them into boxes. It’s amazing how much nicer a home can seem when it’s tidy and clutter-free.

Step 2: Fix any small issues

Do you need to replace any light bulbs? Are the doorhandles showing a lot of wear and tear? Perhaps your screen door is torn because the dog was trying to get outside. This is the time to fix all of those little things you never got around to. This will show potential buyers that you have maintained the home, and they won’t be worried about nasty surprises.

Step 3: Consider staging

Do you still have the couch that your Auntie passed down when you were leaving home? Whilst it shouldn’t matter what your furniture looks like – the truth is that it can make a difference. If your belongings are a little bit rough around the edges, consider hiring or borrowing some nicer items for a few weeks whilst your home is open for inspection.

Step 4: Clean, Clean, and clean some more

It’s not always easy to keep your home spotless – especially if you have small children. But nothing will scare away potential buyers faster than dirty underwear on the bedroom floor, or last night’s Bolognese splattered all around the kitchen.

If you don’t have the time to clean thoroughly before every open house, consider hiring a cleaner for this short period of time. By putting in the extra effort, you could be rewarded with a quick sale, or a better price.

Step 5: Neat and tidy

On the day of each open house, spend a few minutes making the beds (hotel-style if you can) and putting away any items that don’t need to be lying around. Run a cloth over the benches one last time, turn on the dishwasher, and consider taking your dirty washing with you if you don’t have time to get it washed and put away.

If you receive an offer on the house today, you’ll be glad you went the extra mile. If not, you can come home and relax knowing that the housework is already done!

Should you Upgrade your home ?

So, you’re thinking about upgrading your home. Maybe your kids are getting older now and it’s time to find a place with a big backyard.

Most new home owners will make the decision to upgrade before long – but for many young families, a lack of planning can spell disaster when upsizing the family home. Before you start shopping around for a real estate agent, take a few minutes to ask yourself a few simple questions.

Why do you want to move?

Be clear about your reasons for upgrading. Buying an enormous home won’t necessarily mean greater capital growth in the future. Sometimes the greatest growth is in the lower end of the market. If you want to upgrade simply to grow your property portfolio, consider purchasing an investment property instead.

Where do you want to be?

If you’re upgrading to give everyone some space, consider the area that you want to live in. You might be able to afford a much bigger home by moving an extra 15 minutes from the city. It all depends what sort of lifestyle you want to maintain.

What are the real costs?

Investigate all of the costs associated with upsizing your home. That means, not just the additional mortgage payments, but increased utility bills, perhaps a longer commute to work, more furniture to fill the additional space etc. It’s important to know exactly how much the move will cost you – not just the initial purchase.

What about interest rates?

Could you afford to borrow an extra $150,000 if the interest rates were 2% higher? Make sure you take into account some interest rate rises when you work out what you can afford to borrow. Although a lender might offer you the funds, that doesn’t mean that they know everything about your lifestyle and budget.

Will I change my lender?

You might take the opportunity to shop around for a better deal on a loan before you purchase your new property. It’s important to keep in mind though, there could be charges associated with paying out your current mortgage, and there will probably be some establishment fees involved in taking out a new loan. These fees should be part of your decision-making process.

It’s also important to ask your mortgage broker about Lenders Mortgage Insurance. LMI is generally payable when you borrow more than 80% of the purchase price. Depending on your purchase amount, LMI could add up to several thousand.

Did you answer all of the above questions, and still want to upgrade your home? Great! There’s nothing wrong with wanting to move on to greener pastures. But to avoid putting yourself under financial strain, it’s always important to do your homework.