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Mortgage News |
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September 2006 |
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Rates have been on the
move again, but what lies ahead? Our new regular quarterly
economic wrap highlights the factors that influence rate
movements and ultimately affect your mortgage repayments.
And if interest repayments on credit cards and other loans
are starting to put the squeeze on your household budget,
we also look at some practical steps to managing debt.
With interest still in mind, we discuss what homeowners
can do to help reduce their monthly repayments on their
existing loans, and consider how investors can attract
the best tenants to support their property investment.
I hope you enjoy,
Capital West.
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Attracting and keeping
good tenants
The key to successful long-term property investment lies
in finding and keeping good quality tenants. If you've
decided to save the expense of a property manager, following
a few basic principles should put you on the right track. |
Ask a fair rental
If you try and charge too much for rental you'll have
less prospective tenants considering your property. So
find out what the going rate is by looking at rentals
for other properties in your area. Just keep in mind that
even if you do manage to get tenants in at above market
rates, it may not be long before they realise they're
paying over the odds and go elsewhere.
Promotion
If you want to attract the right people, good marketing
is essential. This means advertising your property in
the places that the desired target audience is likely
to be. It's also well worth taking the time to work on
the content of your advert. Don't over promise or visitors
will be disappointed, but make sure your property sounds
attractive. Make sure the advert includes all the key
benefits, such as proximity to public transport, parking
availability and security, as well as features of the
property itself.
Perfect presentation
First impressions are everything. If people inspecting
take a dislike to you or your property you'll never see
them again. That means a clean, tidy and fully functioning
property. Check electrics and plumbing for faults and
put all household appliances through their paces before
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prospective renters arrive
for inspection. And after giving the property a once over,
make sure that you're also looking the part. A suit may
be over the top, but ensure you're well presented - remember,
as a landlord you're effectively running your own business,
and your tenants are your clients!
Check references
Don't underestimate the importance of checking out a tenant's
credentials, because once they're installed into your
house it may be hard to get them out. Talk to previous
landlords for their endorsement, asking, for example,
whether they paid their rent on time, if the property
was kept in good order or whether there were any complaints
from neighbours.
Show the love
Once your dream tenants have moved in, make sure they
never want to leave. That means focusing on making life
easy for them as tenants, rather than for you as the landlord.
Fix problems as soon as they occur, listen to reasonable
requests, and never turn up unannounced. It is important
to visit the property, but once every six months should
suffice. And as a final touch, drop a card and a bottle
of wine round on birthdays!
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Capital West Mortgage Group
P/L
ACN: 125 798 852
ABN: 76 125 798 852 |
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| Tel: |
| 1300 765 234 |
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| Fax: |
| (03) 8621 0080 |
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| Email: |
| info@capitalwest.com.au |
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| Web: |
| www.capitalwest.com.au |
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| Postal Address: |
Suite 604 / 103 Oxford St.
Collingwood
VIC 3066 |
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Need a mortgage health
check?
Put your loan through its paces once a year to make sure
it still meets your requirements. Here are four issues
worth considering. |
Could I be paying less interest?
Although the interest rate alone is not the only consideration
for choosing a loan, it makes sense to check that you're
not paying more for a product than you need to. There
is always competition between lenders to offer the lowest
rate, so even if you had the cheapest loan a year ago,
things may have changed. Before switching to a lower rate
just make sure you take break costs into consideration,
or you could end up worse off.
What's different
in my life?
Has your personal situation changed over the last year?
Maybe you've been promoted, had a pay rise, or gone from
contract work into a permanent position. Different mortgage
products are tailored for different situations, so you
may be better suited to a different loan. For example,
if you were previously self-employed, but are now a salaried
employee, your Low Doc |
loan could be switched to a lower interest product.
Do I need to unlock equity?
Over the years you'll accumulate considerable equity in
your home as you repay your mortgage. But you may be able
to tap into the value that's built up in your home without
having to sell. Australians can use equity from their
homes to fund many requirements - from putting children
through university to increasing assets through purchasing
an investment property. As long as you are able to service
the loan repayments, you may be able to borrow up to 80
percent of the value of your home without having to pay
lenders mortgage insurance.
Could I be paying
off my
mortgage faster?
Some mortgage products are designed to help motivated
borrowers repay their mortgages quickly. If you're striving
to be mortgage free, for example, there may be a more
effective product than your existing loan to drive your
mortgage down.
A 'Basic' loan usually comes at a lower interest rate,
but its lack of flexibility may restrict certain mortgage
reduction techniques. Equity lines, off-set accounts,
and redraw facilities all allow borrowers to pile extra
funds into their mortgage on a regular basis, which may
result in taking years off your repayments.
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Dealing with debt
Understanding the difference between good and bad debt
- and sticking to a budget - are the first steps to keeping
your household in the black. |
Although many Australians despise the thought of being
'in debt', debt should not always be seen as a negative.
Good debt can include anything you need but can't afford
to pay for upfront, without wiping out cash reserves or
liquidating all your investments, such as a property.
Alternatively, loans taken on items you don't really need
(and can't afford) could be categorised as bad debt. Wherever
bad debt arises, you'll find that a credit card is never
far away.
So if you're concerned about rising debt levels in your
household, what can be done to regain control?
Chop up the card - Once safe from temptation you
can set about reducing the outstanding amount without
adding to the problem. Remember, the minimum
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repayments on a credit
card are designed to keep you paying interest for longer.
Work to a budget - Spot the gaps where the
dollars have been leaking by recording what you spend
each month. Once you know where your income is going,
you can set a budget to keep you on the right track. Note
down all regular commitments, including loan repayments.
Anything that's left is your disposable income, although
it's a good idea to try to channel as much of these funds
into additional loan payments.
Change spending
habits - Changing your behaviour is the only sure
way to safeguard against slipping back into trouble. Stop
impulse buying, which means making a list of items you
need before going shopping. Also look for money saving
opportunities, like taking a packed lunch to work, or
cutting out the morning cappuccino. And if in doubt, be
honest with yourself and ask 'can I really afford this'?
Consolidate debt - If you have multiple debts,
consolidation may be the answer! One monthly repayment
can be easier to
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manage than several. What's more, credit
cards are charged at a higher interest than most other
loans, so it may be worth paying off the debt with one
hit and switching to a cheaper rate. One option worth
exploring is to consolidate debts into your mortgage.
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Get
in shape for summer
Shake off winter lethargy and get in shape this summer. With
a goal in mind and a positive attitude, sharpening up your fitness
level could be easier than you think.
- Have a goal. Keeping up with the kids, shedding
a kilo or two or simply feeling fitter - having an objective
will keep you motivated. Put a time frame to your plan,
but keep it realistic or you'll end up disappointed.
- Talk to your doctor. Tell them your goals and your
fitness program - they may be able to help refine your plan.
Take this chance to also note weight and blood pressure
so your progress can be measured.
- Balance fitness with food. Take this opportunity
to review your diet. A healthy balance of cereals, vegetables,
fruit, dairy, proteins and fat is essential to compliment
your fitness regime if you want to reach your goals.
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- Keep it fun. There's no point in committing to
a five kilometre daily run if you hate jogging. Jump on
a bike, go for a swim, or get involved in a team sport.
And if all this sounds too much, a brisk walk for half an
hour each day will make a difference.
- Listen to your body. If you start to ache, or feel
pain... take a break. And if it persists see your doctor
- you might have taken on too much.
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Economic
round-up
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There have been two rate rises so far this year, with
May and August receiving increases of a quarter of a per
cent apiece. So what factors have influenced the Reserve
Bank of Australia's (RBA) decision to push rates up, and
what is the likelihood of another increase this year?
According to a recent Organisation for Economic Cooperation
Development (OECD) report, the Australian economy will
grow at a rate of three per cent this year, rising to
3.5 per cent in 2007. This has been helped by high global
commodity prices, and a booming China economy benefiting
Australia's mining sector.
As a result of a strong economy, Australia is also enjoying
a 30-year low unemployment rate at just 4.8 per cent
1, according to the Australian Bureau of Statistics
(ABS). The effects of a workforce shortage and strong
economic growth - plus the increasing cost of petrol -
have caused inflation to rise to four per cent in the
second quarter of 2006, which is above the RBA's target
of two-three per cent. Inflation basically refers to the
price that you pay for goods, which is measured by increases
in the Consumer Price Index (CPI).
So what does all this mean? Most economists are tipping
at least one more rate rise this year, but much will depend
on how much effect the latest rate rise has on cooling
inflation, what happens to petrol prices over the next
few months, and if consumer spending continues to climb.
On August 10 2006, UBS chief economist Scott Haslem told
the Age that the September quarter CPI index, due late
October, will be a key influencing factor whether rates
rise.
"While we don't expect a knee-jerk response
to today's data from the RBA, it adds to the case for
a further move if at the time of the next CPI release
we have not seen convincing evidence of both slower global
and domestic growth ahead," he said.
While homeowners have no say in what the RBA decides to
do with the cash lending rate, they can take steps to
mitigate the effect of rate increases.
When planning ahead, consider how a rate rise will impact
on your household budget. Also, always stick to a monthly
budget, and keep a close eye on credit card spending.
It's also worth taking a look at your mortgage and considering
whether there might be a more suitable product for you.
Speak to your mortgage broker about what options might
be available.
1 Australian Bureau of Statistics
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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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