Spring has well and truly Sprung, so it’s time to get out there and improve your home.
How much easier would it be if you had a $250 Bunnings or Ikea voucher to help you along?
Want to help yourself along to transform your garden from this:
To this?:
Or does your inside need a little spruce?
Choose from a $250 Bunnings or $250 Ikea Gift Card, on us!
So far this year we’ve had the official cash rate fall over 75 points. On average the banks have passed on 60 points of this. On a $400,000 mortgage, this will save $201 a month, or $2,414 a year (that’s a decent holiday!)
So if you’re not sure how competitive your bank is now, get in touch and we can have a quick review.
Matt
Due to sustained growth in our business, we’ve got the exciting opportunity to offer an experienced admin assistant to join the team working part-time, from our office in Richmond.
Working closely with the Director, Matthew, you’ll be a pro-active team member, with strong attention to detail capable of database management and data entry to produce accurate reports for our clients.
Our office is exclusively Apple Mac, so a working knowledge of Apple programs would be advantageous, but not essential as they’re very similar in functionality, you’ll just need to learn a few extra shortcuts. We also use MS Word and Excel heavily, along with Preview/Adobe and Dropbox. Our CRM is run on Salesforce.
The role is predominately general admin duties such as:
The role is based in our fresh new office in Richmond, flooded with natural light and fresh air, no dingey fluorescent cubicles here. We’re close to the Burnley train station and the number 70 tram. We have end of trip facilities if you’re energetic and want to cycle or walk in, there is also secure car parking available for the time being.
Flexible working hour arrangements can be offered to the right candidate. Seeking someone for approximately 22 hours per week on a part time basis, days and times negotiable. Experience working within the finance broking space would be beneficial, but is not required.
Please email through your CV and a brief cover letter/email for more detail.
Matthew.
Happy Third Birthday!
Wow! What a ride!
It’s with great pleasure that we announce our THIRD BIRTHDAY here at Burgundy House.
Over the last three years we have helped dozens and dozens of young families move into their own homes, investors climb up the property ladder with their first and second properties and businesses grow from renting or working from home into owning a space of their own and cementing their place.
What a journey.
Over these years we’ve seen most clients go from interest rates of 5. Something down to as low as 3. Something! We’ve had clients who bought their home complete minor renovations and see their equity increase by more than 20%. We’ve seen families grow, children move out, loans paid down and businesses boom.
We want to thank each and every one of our clients, referrers, and partners. Sadly we don’t have time to stop and smell the roses this year, we’re too busy getting loans settled and pre-approvals in place so our clients can rest easy.
So let us buy you coffee and a cake, as our way of saying thanks!
Matthew and the team.
We’ve been busy here in our office, interviewing people to come up with their top Winter saving suggestions.
We’ve put 6 of them together in our “Hot To Guide: Winter Hibernation Survival” and we’re sharing it with you.
Relax, they’re not boring mortgage related tips, we know you better than that!
It’s fun, fresh, and easy to read.
So check out the link above or get in touch for your copy.
If you have any other top-tips, we’d love to here them.
Many thanks.
Matthew.
Audience Quiz:
How new is your car? Does it simply get you from A to B, or does it get you there quickly and in style or comfort? Are you so proud you’d set the alarm off, just to draw attention to it, or is it one you park around the street so no one knows it might be yours? It’s ok to be in the middle. It’s where the sensible lie.
Myself, my own car will get me from A to B via C, over the mountain, through the snow and across the river. Yes, I have a new(ish) Landie. It’s a beast of a car, and while I am proud to show it off, I will confess it was quite probably the least well thought out financial decision I’ve made and one that my inner accountant has never let me forget.
When I bought my current set of wheels, I didn’t have someone wise to point out to me what I’m about to show you. How different my life would be if I had.
Getting back to the original question, the title of this post – Are you Driving Your Investment Property? Well, are you? Do you know how affordable it can be to enter even the racing Melbourne Property Market today?
A car in Melbourne, I’ll concede is almost as much a necessity as oxygen or coffee. Let’s take a look though at a basic comparison that I wish I’d known about before I bought my car and one I hope you’ll think more closely about before you buy your next set of fancy wheels.
Let’s look at buying a 2 bedroom unit in a stable but growing outer suburb of Carrum Downs, Vic 3201. Let’s say you bought an average unit, in an average area and rented it with an average agent for an average price. Our assumptions are according to RP Data today and based on the median prices. They’re also based on our experience and that of our clients in the area.
The repayments per month on the above are comparable to buying an above average car, a basic luxury small car, or a second hand 4wd, whichever you want to imagine for yourself. The example also works to show what little can be required to do this and start growing your wealth.
Your average 2 bedroom unit in Carrum Downs would today set you back $286,000 plus stamp duty of $12,000 assuming you are an investor and looking to do everything above board.
Allow me to indulge with the assumptions and assume that you already have equity in another property, either yours or your families you can utilise. You might be a stable family, or an empty nester, or a budding investor looking at starting or growing your property portfolio.
We assume you borrow 100% against this new property. We assume you fix for either 3 or 5 years paying only the interest and we assume you have used a capable broker (such as us) to find you the best deal.
The repayments on a $300,000 loan fixed for 3 years could be $1,097 per month.
The repayments on a $50,000 vehicle loan for 5 years could be $1,013 per month.
The difference here is only $85 per month. That’s about $20 per week. I won’t insult you by telling you how many take-away coffee’s that is, I’m no Joe Hockey, we both know you won’t give them up.
For an extra $20 per week, you can instead build yourself the beginnings of a wealthy portfolio of stable bricks and mortar and one day retire without the aged pension. You can be a lifter, not a leaner. (Sorry Joe).
But wait, there’s more.
Just like everyone’s favourite late night informercial. There’s more, while your new and flashy car will depreciate and soon be not so new, not so flashy and definitely not worth what you paid for it – your investment property will stay as average as ever, slowly but surely appreciating and becoming worth more and more.
Everyone knows that.
Did you know?
A median unit in Carrum Downs (Indeed many outer suburban areas for that matter) can be neutrally, or even positively geared?
That means that after expenses, it brings you in extra cash each month!
In the case above for our $286,000 median priced 2 bedroom unit in Carrum Downs, the median rent for a 2 bedroom unit there is $300 per week. Assuming approximately 5% fees for our average agent, and further 5% for other expenses (although this can vary) you’ll receive $1,170 per month. That’s $73 more than you pay the bank for your interest only loan repayments.
While $73 per month is only $876 a year and isn’t much to look at in terms of your annual coffee spend, if you throw in the capital growth (the amount the unit will increase in price/value) over the last 3 years you’d have come out with a combined total of $4,709 per year.
If you’re working and earning $50,000 a year, that’s the same as having to negotiate a 9.40% pay rise!
So next time you’re looking at the latest model VW Golf, or wondering whether buying the last ever Holden Commodore to be made can fit into your budget – think a little more long term and consider buying an entry level investment property and getting a few more years out of your current car.
Get in touch today to see whether something like this could be right for you.
Your future self will thank you for it.
Note: All figures used above are current as at the 15th February 2016. Median prices are as per RP Data, accessed 25th January 2016. This was prepared without taking into account your situation and as such should not be relied upon. Please seek detailed advice from a professional before entering into any financial transactions.
Savvy borrowers have an endgame in sight before they even apply for a home loan, and with the right mortgage offset account, they could win that game even more quickly.
Home buyers usually focus on the here and now, not the distant future. Rather than the size of their loan balance in 10 or 20 years, they are more likely to think about how much they can borrow and the kind of house they can afford.
But smart borrowers know the future matters. The years roll around and it’s always better to pay off a mortgage before its term and pay less interest to the bank.
The good news is that if a mortgage offset account is right for a borrower, it can help them do just that. An offset account can make them a match for their mortgage.
What is a mortgage offset account?
A mortgage account with 100 per cent offset is a fully featured transaction account that sits alongside a home loan. In many ways it acts just like a regular bank account, you’ve probably got at least one at the moment.
However, along with the usual facilities, like ATM access and direct debit, there’s another significant advantage: Any money sitting in the offset account reduces the amount that the bank calculates interest payments against.
That’s right. The loan principal is reduced for the purposes of interest calculation by the amount of money in the offset account, without increasing the repayment amount.
Forget about receiving 0.001% per annum on money in your day-to-day transaction account, save and “earn” interest at your variable rate, for most of our customers this is about 4.20% to 4.50%
How does an offset account work?
An example may make it easier to understand how an offset account works. If a home buyer has a principal of $350,000 outstanding on their mortgage and also has $10,000 in a linked 100 per cent offset account, the bank will only charge them interest on $340,000.
The money they save in interest goes straight into paying down their loan principal, which has the effect of reducing the interest paid over the life of the loan, as well as the overall loan term. Less money paid off faster.
When borrowers realise that banks calculate interest on mortgages daily, offset accounts can be used proactively. For example, getting salary paid into an offset account means the loan principal is in effect reduced by that amount as soon as it is paid.
Savvy borrowers may even choose to use interest-free days on their credit cards to pay for goods and services, so they can keep cash in their offset accounts working for them.
How can Burgundy House help?
As a mortgage broker, we help borrowers apply for and secure appropriate home loans every day, and many will have an accompanying offset account. We will always compare a range of competitive products, and look at loan features like offset accounts so our clients can make informed decisions.
Anyone with a mortgage can choose to have a linked offset account, although it will depend on the loan type and institution. It’s always best to check the offset is 100 per cent.
It’s important to know that offset accounts are usually included as part of fully featured home loans, which might mean you pay more in fees or a higher interest rate. So discussing your financial circumstances with us could be a smart first step.
Game, offset, match
If you’re serious about winning the mortgage game, you need to be aware that having a mortgage offset account could offer you an edge in the long term.
In any sport, a match isn’t won instantly. Points are accumulated over time. With the points scored daily by an offset account, it can be game, offset and match.
For more information contact Matthew today.
The beginning of a new year is a great time to take stock and think about how you can improve your life. Many of us start the year with good intentions, but things often get in the way as the year progresses.
Getting your finances in order is a common resolution and like quitting smoking and losing weight, there is no quick and easy solution. The best way to make 2016 a year of real achievement is to make a few small, regular changes and reap the benefits over time.
Below are 6 common goals we hear from our clients, and some tips on how to help you achieve them.
Spend Less
Everyone has monthly expenses—you need a place to live and to eat. But you may be able to reduce the costs—from refinancing to a lower mortgage rate to shopping around for lower-priced phone or electricity plan, and stocking up on things you use often when they are on sale. Discretionary expenses—those “nice to haves”—likely provide an even bigger opportunity for savings. If spending less is your goal, take a look at how often you eat out and any impulse purchases. When you see how much they cost you each month, it may provide the incentive to cut them out.
Save More
Saving more is a close cousin to spending less. After getting a sense of your spending, you can begin to figure out how to increase your saving. A haphazard approach to saving will almost certainly produce haphazard results. The key is to create a savings plan that will help you stay disciplined when it comes to the amount you put away each month to meet your various savings goals. One of the simplest ways to ensure you save regularly is to make it automatic. That means scheduled, regular, automatic transfers into a savings or offset account. If the money isn’t in your spending account, for instance, you are less likely to spend it frivolously.
Pay Down Debt
Credit-card debts, car loans, and mortgages— you probably have a variety of debt, as most people do. And the monthly payments can take a big bite out of your income. The key is to pay down the debt with the highest interest rate first, which is usually high interest rate credit cards. Consider paying more than the minimum each month. Check your credit card statement to see how long it will take you to pay off the balance—and how much it will cost. The statement usually suggests how much you need to pay each month to pay it off completely.
Set Aside Money for an Emergency
Managing your money would be much easier if life went exactly as planned, but it seldom does. That’s why an emergency fund is essential for dealing with everything from a blown transmission to a lost job. It’s recommended to have a cash reserve sufficient to cover three to six months of expenses. Ideally in an offset account if one’s setup.
Have a Budget… and Stick to it!
Trying to navigate your financial life without a budget is like trying to drive a car without a speedo. You’d never do that, really? The good news is that you don’t have to micromanage every penny. After a quick analysis of your current spending into some basic categories, compared with your expectations is a great start to trimming the financial fat. Undoubtedly, your financial situation will change over time. A budget is essential for both spending and saving. Once you know where your money is going, you can make an informed decision about how to allocate it.
At Burgundy House, we take your finances seriously, we’re more than just your average street corner mortgage broker – we’re in it for the long haul with you. So if you need any help along the way, whether you’re starting out, trying to save for your deposit, or paying down your debts, or looking to retire – give Matthew a call to discuss ways we can help you.
Are you like many of us who make the most adamant of promises to yourself and the universe at the beginning of each new year?
Are you like many of us who find the end of January approaching and find your goals unmet and discarded?
Let me let you in a little known secret.
Get help!
I don’t mean find someone with a sofa to lay into and divulge everything from your awkward childhood. I mean find a partner. Someone to help you with some of your goals.
If you want to scale Everest – find a Sherpa.
If losing weight is your goal – pick a personal trainer you find will help.
If saving money makes it up there, talk to Matthew – your personal mortgage broker.
Why is this a secret? It’s not done. People don’t like telling their goals to someone for fear of being committed. Telling someone your goal, or at least writing it down makes you instantly more accountable to your goals.
It follows then that this is the same reason you’re therefore statistically more likely to achieve your goal. Always assuming it is a S. M. A. R. T. goal in the first place.
So if you’re looking to partner with someone with more knowledge of the current loans available in the market than the guy from accounts you chat to in the tea room on Fridays… Call Matthew today.
The $10,000 school holiday challenge
A recent Yellow Brick Road survey from June of 1,000 Australian mortgage holders revealed a remarkable statistic. Despite interest rates being at their lowest in nearly 60 year some 83% of Australians with a home loan have not even looked at refinancing in the last 2 years.
Failure to refinance to a better interest rate means you are just handing money to the banks. A typical loan taken out in 2010 might today be on a current variable rate of 4.80%. However rates of about 4.30% are widely available and often even better deals are offered by lenders seeking market share.
The potential savings from just a simple refinance to a lower rate could be over $10,000 over the next 5 years on an average $350,000 loan. They’re $45,000 over the next 25 years. On an owner occupied home that’s $10,000 that has to be earned after tax. That’s a lot of hours on the job just working for the bank. It’s the same as a $245 a month payrise.
The survey showed that people didn’t look into refinancing because a) they didn’t believe that they’d save enough money, b) they thought the fees would outweigh the benefits and c) they perceived the process to be too much of a hassle. For many of our clients, it’s been a combination of all three in a lot of cases. Exhausted after long working days most of us are just too tired to battle with the banks.
That’s where a broker like Burgundy House could be your new best friend. With 25 lenders on our panel and access to over 4,000 different loan products we can do all the investigation and leg work for you. Find you a great rate, prepare the paperwork and follow the whole process through to completion. All at no charge to you as we get paid by the lender once the loan settles.
With little more than an hour of your time, more often than not we come to you after work, or on the weekend, have an easy conversation and get back to you within a week with our recommendations – which isn’t always that you should change your bank. Wouldn’t you rather be sure though?
If you are in the majority and haven’t refinanced for years let me leave you with this thought. Your home loan is quite probably the largest single item of monthly expenditure for your household. Compared to mortgage repayments, fuel costs are a drop in the bucket. Yet all of us will drive to the next suburb to save a few cents a litre. With school holidays fast approaching you have a marvelous opportunity to take some time to review your existing mortgage and let us do the hard work to try and get a better deal for you.
Take up the challenge and invest one hour to review your existing mortgage, for FREE, with Matthew. Call 0416 414 242 or email [email protected] now to secure a convenient appointment time over the holiday period.
Here are some real life examples of clients we’ve helped this year save money on their mortgages:
HM and MM. Reservoir. Owner Occupied and investment property, combined loans of $650,000. Interest rates of 4.30% and 4.62% moved to 4.15% and 4.45% Saved $165 per month.
LG. Footscray. Owner Occupied loan of $290,000. Interest rate of 4.85% moved to 4.14%. Saved $95 per month.
KG and CG. Boronia. Owner Occupied loan of $540,000 Interest rate of 4.60% moved to 4.19%. Saved $152 per month.
SE. Hampton Park. Owner Occupied loan of $230,000. Interest rate of 5.01% moved to 4.23% Saved $143 per month.
This morning I delivered a key-note presentation to the staff at a local primary school. The brief was “How to save money on your home loan”.
Afterwards as I was mingling in the crowd and an indignant teacher asked me about his investment property, specifically why he should bother with refinancing to save interest, given it’s tax deductible anyway?
It’s a powerful question and one that leads into more serious debt reduction talks. For the benefit of my readers I thought I’d discuss it as this weeks topic.
The question I’m going to answer is when is it right to pay down an investment property loan. The answer is, as always, it depends.
When repaying your debts it’s often wise to look at things objectively. Your credit card would usually be the first thing that should be paid down, as it will be incurring interest at often obscene rates. The second would usually be a car or other personal loan, as this is the next highest. Your home loan should be the next in line as this is often a significant debt that offers little, if any, taxation benefits.
Investment property interest paid can be one of those deductions that people love to have for the sake of it. Having worked as a Tax Accountant I think it often akin to buying stationary you don’t need, in June just to have the tax deduction in July. Getting back to the original question though, if you had no other non-deductible debts, for instance you’ve paid off your credit card and your home mortgage, what benefit is the loan to you?
If you are a great saver, have inherited money or otherwise don’t have a home loan, a credit card or other loan, firstly – congratulations. Secondly, assuming you have an investment property that is offering tax benefits to keep the loan, why shouldn’t you keep it?
You wouldn’t – because even though it is saving you money on your tax bill each year – it’s only saving you roughly 32 cents in the dollar – more or less depending on which tax bracket you fall into. That still represents 68 cents for every dollar that you have to pay to claim the tax deduction. Why pay money out to the lender, to get just a third of it back from the Tax Office?
There could be a number of reasons why your circumstances may benefit you to keep the property geared, although for many – it can be little more than a common misconception. Paying down your debt is usually of great benefit. A property is a wonderful asset, and one that you can always borrow against later down the track if you find a worthwhile purpose.
There are a number of factors that come into play and I must declare that this advice I have provided is only intended to be general in nature and doesn’t take into account your individual circumstances and should not be relied upon as such.
Make contact with me to discuss your specific individual circumstances. There’s nothing like a good brainstorm.
If you, or someone you know is looking for your next set of wheels, think twice about where you get your finance from so that you don’t get caught out.
Let’s talk about Jason – who’s just bought a new car, financed through his Burgundy House Finance Broker.
Jason wanted to shop around for his finance and was surprised at what he found, he started with his local bank, talked to the car yard and finally came back to Burgundy house where he had purchased his home loan, remembering we could help with a car loan.
He only needed to give his details to me once, as he had already spent many hours doing his research. Jason who works full time and was worried about having to take more time off, but he knew the benefits of shopping around, and suddenly remembered Burgundy House would do it for him at no charge. I was able to meet him at his home after work, get all the information that was required and do the shopping around for him. Luckily for Jason, I was able to shop around another 12 of the lenders in the market and find the best deal that was right for him.
Using the services of a broker such as Burgundy House meant that Jason got a Ferrari-fast loan through a well-known lender, which saved him an amazing $75 per month. That’s $4,500 over the life of the loan on a $30,000 car compared to his big bank’s initial offering.
See the table below on how much we saved him even off the dealer’s finance:
| $30,000 loan taken over 5 years | Big 4 Bank | Car company Dealer Finance | Burgundy House arranged finance |
| Monthly Repayment | $662.12 | $611.14 | $587.78 |
| Monthly Savings | $74.34 | $23.36 | |
| Loan Savings | $4,460.40 | $1,401.60 |
If you or someone you know is in the market for a new car, why not check you’re getting the best deal, while saving time and knowing you have an expert on your side.
We come to you, at work or at home and take the hassle out of securing the finance for your next car.
Why wait? Call Matthew from Burgundy House today to find out how much you could be saving.
Note: this advice is prepared without taking into account your personal financial situation or objectives and is provided to be general in nature.
If you’ve ever wondered why neighbours or friends are always talking about the property prices, and recent sales – it’s got a lot to do with knowing the value of your house in comparison to similar nearby houses, as that’s a strong indication of the value of your home.
Bank’s and lenders will engage an independent valuation company, who use similar comparable sales to your property to give it a bank valuation.
This is always based on a quick, fire sale situation – as the bank won’t be able to hold out for the right buyer in the event they have to foreclose – as such it is mostly always at the lower end of the scale. It may be more wise to think of it like the price a used car dealer would offer you for a quick sale, rather than the price you could obtain if you sold your car privately and waited the 4-8 weeks it takes on average.
If you’re after more information, why not get a detailed property report or a just a free suburb profile? Check out the link here for the free suburb report, or contact us for a detailed and property specific report.
Happy hunting!
Real estate agents are many things to many people, but their first and foremost role is in sales. This means they’re committed to focusing on a property’s finest features, sometimes using optimistic descriptions that don’t always match up to reality.
With this in mind, it’s easy to see how some property advertisements seem to border on hilarious.
A coastal Queensland property, recently listed for almost $900,000, offered ‘a rare opportunity’ with ‘endless possibilities’. ‘The property holds very strong bones and really is the perfect blank canvas’, according to the advertisement.
Translation: Perhaps it’s liveable, perhaps not. Maybe the owners made it part of the way through renovations before running out of money. Whatever the case, this property probably needs some love, that is work, before anyone would want to live in it.
“Property buyers are bombarded with all sorts of marketing lingo, and often agents use artfully crafted phrases to catch your attention”, explains buyer’s agent, Michael Yardney from Metropole Property Strategists, who spends his days decoding ads for his clients and matching them with suitable properties.
He offers a tongue-in-cheek guide to the colourful words that real estate agents regularly use. “If you see these terms in any real estate marketing piece,” he says, “you’ll know what they really mean.”
If you are thinking about buying, speak with Matthew from Burgundy House before you hit the streets to find your perfect property.
Who you gunna call?
Buying your next home, especially if it’s your first home is a tremendously exciting, and nerve wrecking time. If your dream home is being sold by auction, it’s good to be prepared as there are some differences between a usual sale and an auction. To avoid getting caught out, arm yourself with knowledge and follow our tips.
Research!
Don’t buy at auction on impulse. Once the auctioneer’s hammer has fallen you’re obliged to pay that amount and at the vendors terms as outlined by the auctioneer prior to the auction. There’s no room to put conditions in as with a sale. So be sure to read the contract before bidding.It’s a good idea to have your conveyancer read through it as well.
Deposit bond or Cash?
You may not have the deposit required up front to pay when you win at auction if you are borrowing the maximum you can against the property, or using a parental guarantee. This is where a deposit guarantee comes to play and is a very useful tool in your arsenal. It’s best to inform the agent prior that you will be bidding and using a deposit guarantee. These are common in Victoria, and growing in popularity as prices (and deposit sizes)rise.
Know your limit!
Know your limit, and stick to it! Auctions are very fast paced and exciting and it’s easy to get carried away. Arrange a preapproval prior to attending the auction, know how much you can spend, what the repayments will be at that limit and take someone else with you who can help you enforce the limit. It’s too common an occurrence that clients call up on Monday after winning at auction, only to find the house is too far out of their reach and they’re put into a hard position trying to beg borrow or steal to pay for it. It can make a dream quickly turn into a nightmare.
Don’t catch auction fever!
Worse than the flu is auction fever. An auction is a fast paced exercise, often over within 10-15 minutes. They’re full of excitement and nerves, with the auctioneer doing his best to squeeze more and more money from the audience. Remember, the auctioneer is working for himself and the vendor,not you. Know your limit. If you’re thinking of creeping marginally over your limit, as most do – don’t forget the other costs. Stamp duty is the main one,as the value of the property rises, so too does the stamp duty. If you’re a first home buyer, there is a 50% reduction in the stamp duty up to a $600,000limit. So if your auction price is $600,000 the stamp duty will be $15,535. If your auction is $600,001, just one extra dollar, the stamp duty will be$31,070. Buyer beware!
Keep these four tips in mind when you’re headed out to the auctions over the weekend. Remember, it’s not all doom and gloom though if you’re well informed. Buying at Auction is fun, exciting, and quick, there’s no lengthy waiting and offers and counter offers as with a non-auction sale.
We wish you the best of luck in your search. Don’t forget to get in touch if you’re interested in buying your new home.
When Bronwyn set out to build her dream home, luck was not on her side. In fact, it was an all-round disaster zone.
At 63 and with a couple of investment properties under her belt already, Bronwyn was ready to demolish her home and rebuild as a dream home for herself, her daughter Lisa and her daughter’s partner Rob.
She didn’t expect to run into any trouble; after all, she’d been through all the process of securing finance and purchasing property before. She visited her bank and, after a slight drama when the bank couldn’t locate the title deed to her unencumbered property, had a verbal confirmation that a loan had been approved.
She demolished her home, excited at the prospect of a fast construction and getting into the new house.
Then, the bank called. Her finance had actually been declined. To compound the problem, the demolition bill had skyrocketed when asbestos was found in the property.
Bronwyn was referred to an MFAA Approved Credit Adviser to try to sort out finance.
“She was living in a caravan on the front lawn of the daughter’s house next door at the time,” Bronwyn’s credit adviser recalls. “It was really difficult for her, $50,000 out of pocket and living in a tent and caravan on her daughter’s front lawn, and staring at her vacant block of land next door.”
Arranging the loan at that point was slightly complicated because many lenders won’t look at an aged pensioner, but with the other properties as security, the loan was finally approved – formally, in writing.
The builder poured the slab on the block of land, kicking off construction, and promptly went broke.
“It just got better and better,” quips Bronwyn’s credit adviser. There was one piece of luck though: “A day before we were going to disburse the funds for the slab, we received confirmation that the builder had gone broke, so we were able to stop the transaction.”
Meanwhile, Bronwyn was still stuck next door for a few months, while her credit adviser tackled the problem of having the loan agreement amended to allow completion of construction with a new builder – with the slab having gone down, it was technically a partially constructed house.
An even bigger problem was the fact that the builder had arranged frames and windows from contractors who were also set to be out of pocket.
“We had to negotiate with the lender to bring in a new builder, and then with that new builder to utilise the contractors who already had the frames and windows,” Bronwyn’s credit adviser explains. He also got involved in the insurance tussle when the original builder went broke, liaising with a legal team when the insurer was, in his words, “bucking a bit”.
While this is more involvement than a credit adviser would usually have in the process, the credit adviser describes the chance to pitch in and solve problems as highly rewarding.
“We do usually get involved with negotiating with the builders, but not usually to the extent where we get involved with their subcontractors,” he says. “It was a fairly complex one, but it was pleasing that, when we had these obstacles come up, we were able to negotiate with all the different parties to get the desired result.”
The desired result was the completion of construction, so now Bronwyn lives in her dream home and is renting out another two investment properties in the same street. Two years on, she is looking for opportunities to expand her property portfolio to increase her rental income.
“While we are here to make a living, the part that gives you most pleasure is seeing the smiles on people’s faces when you overcome these obstacles,” her credit adviser says. “I think when you step into that void and fill the gap you’re doing a lot more than what a bank can offer, and it’s a pleasure coming to work, because you know you’re making a difference.”
*Names have been changed to protect clients’ privacy.
MFAA Approved Credit Advisers are industry experts who are always on your side. Burgundy House is a MFAA approved Credit Adviser. Use our Contact page to get in touch.
If you’re looking to buy your first home, or even just your next, it’s good to be in the know. Make sure you’ve got these top 5 mistakes that others have made before you right first.
These are all traps you’ll be advised of in our meeting, but before that, have a quick read through this handy guide.
Your credit report.
While most people cringe at the thought of having to get into any nitty gritty about their credit, sadly this is an essential task that often gets put into the too hard basket until it becomes a problem. I recently had a client who always paid his bills on time, and assumed he had a perfect credit score. Right before we were ready to settle on his new loan the lender asked about a default on his account from Telstra way back from 2011.
That will never happen to me? That’s exactly what he’d thought, turns out it was a mistake and was easily rectified, but it added a month to our “Quick” refinance, and caused a lot of stress for the client.
I don’t want you to be that client – so check your credit report frequently. It’s free if you wait the two weeks, and will save you a lot of angst later down the line, when you’re already full to the brim of stress and excitement.
Pre-approval.
This is a gem, it’s always a great idea to get this organised before you go to an open house and find yourself bidding at an auction! Not all lenders will complete a full credit check when they offer you a preapproval, so make sure you check your credit report, and with the lender to make sure. You’re here to avoid any nasty surprises!
By have a preapproval, you know that you can shop and bid and inspect with confidence, you’ll know your limit, and you’ll know how much everything will cost, before you move in.
Research.
You can never do too much of this. We’re not even just talking about the local prices and other places in the area, go to the area, if you’re looking to start a family, make sure you’ll fit everything, there are schools nearby, shops, transport anything that you’ll need.
Chat with neighbours, local shop owners, whoever you can find to make sure you’ve got a proper feel for the neighbourhood. Unlike a rental, it’s a more complex process if you want to move again.
Once you’ve found the ideal neighbourhood, check out the house. In detail. Make sure it’s not going to crumble in the next few years,there are no termites, and if it’s going to need some major works, make sure that’s included in the price you pay and in your budget.
Bring a builder friend around for a look with you, or better still, engage a professional building inspector to help you. If you’re buying an apartment – it’s a handy tip to check the body corporate notes, in case they have major works planned, and to see they do regular maintenance.
Know about the hidden costs.
Education is key and congratulations for getting stuck into it.
A conveyancing solicitor will be required to make settlement run smoothly, they can also be a helpful adviser to check through the property paperwork to ensure there are no nasties coming for you.
Purchase costs, beyond the price of the house, you’ve also got your stamp duty and maybe lenders mortgage insurance. Owning a home is also more expensive than renting, there are council rates to pay, building insurance is a requirement of your mortgage.
There are also other things that pop up when owning that don’t when you rent, like maintenance and body corporate fees. If something goes wrong, you’ll need to arrange the plumber or electrician to come out. Consider something like RACV Home Assist,or make sure your tradie mates are invited to your housewarming, and keep them onside.
Finally, Emotions.
All the knowledge in the world couldn’t help you get caught by this one.
When you fall in love with a house, desperate to make it your home and you come across another at the auction who feels the same, it’s crucially important to maintain your cool. You’ve only got preapproval up to a certain level, and you never took a building report out, but you’re sure it’s the one and must have it at all costs.
Sit back, take a breath, and be smart. Buying your first home is not something you should take lightly, so be prepared, and do it right.
You’ll only ever buy your first home once, make it a dream, not a nightmare.
If you want to be bidding at the next auction, you need to get in touch with Matthew – your Burgundy House Broker to learn more on 0416 414 242.