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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, 55% of us discover ‘hidden problems’ after the settlement.

Please read this article on how to avoid problems before finalising the purchase of your next home – Biggest Investment: https://www.mortgageaustralia.com.au/email/files/biggestinvestment.pdf

Get it wrong and you will pay thousands of dollars more than you need to.

Use this free guide to help you make the right choice: https://www.mortgageaustralia.com.au/brokervbank.pdf

Your home is probably the biggest purchase of your life. It makes sense that you should give this decision the attention it deserves, and do your homework. Why then, do so many people get it wrong?

Searching without getting finance approval

There’s nothing worse than finding your ideal home, only to miss out because you’re still trying to get your finance approved. To avoid disappointment, don’t even glance at the property listings until you sit down with a mortgage broker. It can take a few weeks to get your ducks in a row, so there’s no point getting excited until you know what you can spend.

Lack of research

Many purchasers get swept up in the moment and don’t take the time to do the necessary research when buying a property. How do you know you’re getting a good deal if you don’t know what other houses in the same area have sold for? It’s important to keep a close eye on sold results in your area before you make a move. That way you will be better placed to negotiate with the selling agent.

Putting your trust in selling agents

When meeting the agent who is selling your dream home, you might be pleasantly surprised at how helpful and genuine he seems. He might ask you plenty of questions about your budget, and what sort of home you’re looking for. He will probably offer to put you on his mailing list so that you’re the first to know about new properties for sale.

Don’t be fooled – this guy is working for the vendor, and it’s his job to get the best possible price for his client. He probably is a nice guy to his family and friends, but to you – he’s on a need-to-know basis. Watch what you say, and don’t get your hopes up if he offers to ‘help you get a good deal’.

Stretching your budget

Many homebuyers fall into the trap of spending more than they can afford to repay. You might be pleased when a lender offers you more than what you originally planned to borrow. But without knowing everything about you and your lifestyle it’s really just the computer throwing out a number. You are the expert when it comes to your own habits, and it’s important to allow for unexpected costs, and some interest rate rises when deciding how much to borrow.

Purchasing without an inspection report

It might seem obvious if you’re a details person, but obtaining a ‘building and pest inspection report’ is something that often gets overlooked. Many buyers think that the vendor will reject their offer if it has too many conditions, and decide that they will forgo their right to have the property inspected by an expert. The reality is – if the vendor isn’t willing to allow this inspection, they either know about a problem with the property, or they haven’t paid enough attention to be sure that there’s nothing wrong. Either way, this might not be your ideal purchase. Just think – how would you afford to pay for the house to be re-stumped if you discover a problem down the track?

Failing to account for additional costs associated with owning a home

It’s expensive to own a home. That’s just the way it is. You will now be responsible for lots of costs that previously belonged to your landlord, such as council rates, water rates, home building insurance, maintaining fences, replacing broken hot water systems – and the list goes on. Make sure you have enough in savings so that you can still sleep at night.

Buying a property sight unseen

It seems insane but there are people out there who will purchase a property without actually going to see it. Maybe they are looking to move interstate, or cannot attend due to an overseas trip. Whatever the reason, this is obviously a huge risk, and it often ends in a world of pain. Don’t put yourself in this vulnerable position, unless you have a buyer’s agent working on your behalf, and you have a rigorous inspection report done by a qualified professional.

When mum and dad investors consider property, most look no further than the residential market.

While homes and apartments may be seen as simpler and safer options, many investors are prepared to defy tradition and set their sights on the commercial sector.

Commercial property differs to residential, but with the right understanding of the key drivers, it need not be more complex.

How does commercial property differ to residential?

Firstly, commercial property attracts GST on the purchase price and the rent received, unlike residential real estate, which remains GST-free on both fronts.

An exception to this may be where the property is acquired with an existing lease in place. In this case, the vendor may be able to treat the sale as a ‘GST exempt sale of a going concern’ (refer www.ato.gov.au).

Commercial properties also usually attract higher yields – seven to eight per cent on average, compared to half that for the residential market. But the higher returns are often offset by the bigger risk of longer vacancy periods, which is why choice of property is paramount.*

On the up side, commercial tenants tend to take much longer leases than domestic renters, providing a stable financial footing for your investment.

Another distinction is who pays for property upgrades. In the residential sector, owners foot the bill for maintenance, repairs and improvements, while tenants usually cover the cost of refurbishments to suit their particular enterprise.

The right property

With retail outlets, offices and industrial estates all sitting at the heart of our economy, it can be hard to decide which type of commercial property to invest in.

Many first-time commercial investors are business owners looking to end the rent cycle and acquire an asset at the same time. If you don’t own your own business, a good starting point is to consider the same principles that apply to residential investment.

Look for properties in growth sectors in areas with low vacancy rates. A drive around any light industrial estate, CBD or retail strip will quickly reveal the ‘for rent’ signs and give you a pulse check on local supply and demand.

You should also consider local infrastructure, such as transport, and even commercial entities that may be a drawcard for others. In the retail sector, a big brand name with a long-term lease (called an anchor tenant) can be the attraction for smaller operators looking to cash in on the high foot traffic the big name will generate.

Commercial tenants also look for properties with high visibility, easy access and plenty of parking, especially if there is no public transport nearby.

If looking at a light industrial property or office complex in a commercial estate, check it is not in a flood zone. Some commercial complexes are built in low-lying areas at risk of riverine or flash-flooding. Flood cover is not always offered on commercial properties and can be costly when available, so assess the risk thoroughly before you invest.

Commercial property agents will happily help you with the property hunt. Keep in mind their job is to sell, so make sure you do your own homework on values, vacancy rates, average rents and potential tenants for any property put forward.

Another helpful starting point is your mortgage broker. They can help you work out your budget based on your existing loans and financial arrangements and find a loan product suitable for your circumstances.

The right tenants

Attracting the right tenants is the key to successful commercial investment. Concerned by the potential for long vacancy periods, commercial property investors often snap up the first tenant who comes along.

Take time to research whether the applicant is in a viable sector with strong demand or a waning one. While you can lock any tenant into a three-year lease, an insolvent business will not be able to pay the rent, no matter how many demands you place on it.

On the other hand, a flourishing business with a strong track record may request a longer term lease in some cases up to 10 years. You may even be able to request a bank guarantee for the term of the lease.

* The information contained in this article does not constitute either financial or taxation advice. We recommend you speak with your financial advisor, and as taxation legislation is complex, you should consult a tax advisor or contact the ATO for further details and expert advice in relation to your personal circumstances.

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 refinance?

“My lender is charging me a higher home loan rate than I see advertised elsewhere. Can I change lenders?”

This is exactly the reason why most people change lenders. There may be a penalty clause in your current home loan, meaning you may need to pay a discharge fee, but it could still be in your financial interests to change.

When shopping around it is always important to look for the comparison rate of a product. A comparison rate is essentially the true rate, taking into account the fees and charges you will pay on the loan. So even though you see a lower rate it doesn’t mean the repayments are less.

“I have just come off a ‘honeymoon’ interest rate to a much higher rate. Can I move lenders or am I locked into my mortgage?”

You can walk away from most mortgages, although penalty fees sometimes apply to fixed rate loans.

“If I move my mortgage to a new lender, is there anything stopping that lender from increasing their rates in a few months time?”

It depends what kind of product you have. If you’re concerned about rising rates, perhaps you should consider a fixed rate home loan, where repayments are fixed for a period from 1 to 5 years.

“Why do some lenders charge more than others for lending the same amount of money?”

Banks and other lenders pay different amounts for the money they on-lend to you, they have different overhead structures and different profit expectations. All these factors affect how much they charge to lend people money.

“What documentation do I need to refinance?”

The last 3 – 6 months of mortgage statements is sufficient to begin this process. I can advise on other documentation.

No longer is debt de rigeur. In this post-GFC era we prefer to play it safe with lower levels of debt and are looking for ways to be debt-free faster.

Savvy savers are making the most of low interest rates and their savings by maximising offset accounts. An offset account is essentially a savings account that is linked to a loan account. Instead of earning interest on your savings deposit, the funds are used to offset the loan account.

Your loan repayment remains the same, but more of it is used to pay off the principal, reducing the life of your loan and slashing the amount of interest paid.

How offset accounts work

Lenders generally offer two types of offset accounts: full offset or partial offset.

A full offset account offers you the same interest rate on your savings as what is charged on your home loan. For example, if you have a $100,000 home loan with interest charged at 6%, plus $10,000 in an offset account earning 6%, the lender will offset your loan balance with your offset account balance and only calculate interest on $90,000.

A partial offset account only offers you a standard savings rate, which is lower than the interest charged on your home loan, so one does not completely offset the other. Using the same example as above, a partial offset account might charge the same 6% on the loan but only offer 4% on the savings. Instead of one lot of interest completely offsetting the other, you would pay a reduced interest rate of 2% (the difference between 6% and 4%) on $10,000 of your loan.

Many borrowers opt for a 100% offset account to take full advantage of this feature, but speak to your broker for more information about this type of account.

Benefits

An offset account still allows you to make extra payments on the loan. However, instead of paying more into your actual mortgage, you maintain as high a balance as possible in your savings. This reduces the interest and life span on your loan but gives you all the access and flexibility of a regular savings account, should you need it.

Some lenders even allow you to set up an offset account with a fixed rate loan, giving you certainty around your payments plus the opportunity to get ahead of the debt.

There is also the added benefit of a tax incentive. Because the interest is essentially not earned, you don’t have to include it in your taxable income.

Still in the nest

The key to maximising an offset account is to maintain as high a savings balance as possible. The first step to flesh out your finances is to have your salary paid directly into your savings account. Then it’s a matter of keeping your money in the savings account for as long as possible.

One of the most effective tools is a credit card with a generous interest-free period. Look for a lender offering 55 days interest free. While it may seem strange to use credit to save, putting as many costs as possible on a card with a long interest-free period can be an effective loan buster.

The interest-free period allows you to squirrel away as much of your pay, and any other earnings, for as long as possible to maximise your interest earnings. You just need to make sure you pay off your credit card debt in full before the interest-free period runs out.

What you should consider

An offset account can be a very effective strategy to stay one step ahead of your home loan, providing your spending does not outstrip your savings and you leave your funds to grow over time.

You also need savings to start an offset account. The whole concept fails if you don’t have any savings to leverage in the first instance. You then need to ensure you can maintain surplus cashflow, especially if taking advantage of a credit card with an extended interest-free period. If that’s the case, you will need to be disciplined with expenses, payments and timing. If tempted to put too much on the plastic, the credit card tactic may become a debt trap.

Similarly, if you don’t want to be tempted to overspend, you may be better off injecting any spare funds straight into your loan repayments instead of turning to an offset account.

Look for an offset account that still gives you the standard benefits of a regular savings account: ATM, EFTPOS and telephone and internet banking. Although the aim is to maximise your savings, you still want to be able to access and use your funds as you would with any regular savings account.

Lenders also often charge a higher home loan rate for an offset account. Ask your broker to help you shop around for the most competitive option to suit your circumstances.

If you are still paying off your home or an investment property, but also managing to sock away some savings, an offset account could help you be debt-free faster. Talk to your broker about your circumstances to find out which options may work best for you.

Are you a planner? Do you like to organise things in advance, and enjoy the security of knowing what the future holds in store? Do you take a comprehensive list with you to the supermarket?

Well a fixed rate loan might be your perfect fit. Fixed rate loans are:

Great for managing a tight budget…

Fixed rate loans are an excellent option for anyone who is operating on a very tight budget. If an extra fifty dollars per week would mean choosing whether to feed your children, or put petrol in the car – this is probably the loan for you.

Great for peace of mind…

If you opt for a fixed rate loan, you will know exactly how much your repayments will be for the duration of the fixed period. Many lenders offer up to 10 years on their fixed rate loans, so this could give you substantial peace of mind.

Fixed rate loans can save you money…

If interest rates increase during the time when your rate is fixed, you will be immune. When everyone else is complaining about having to give up their daily coffee, you’re safe in the knowledge that your repayments aren’t going to change.

On the flipside though…

You will forfeit your chance to pay a reduced interest rate if the Reserve Bank rate is lowered. When other borrowers are enjoying a well-earned reprieve, you will still be making the same repayments. This can represent a significant cost to you if interest rates drop by half a percent or more.

Less flexibility

If you choose to fix your rate, you get security at the expense of flexibility. You probably won’t be able to change the features of your loan during the fixed period, and most lenders don’t allow you to make any lump-sum repayments when your rate is fixed.

It’s critical that you take the time to research the different loan options available to you, and ask plenty of questions to ensure that the loan you choose is the best option for you. For many borrowers, fixed rate loans are an excellent choice to help you manage your budget and plan for the future.