Wednesday, March 30, 2011

What Are Mortgage Progress Payments?

Mortgage progress payments apply to construction home loans. When you are looking to build a new home, you will look at many different display homes, to see which one suits your lifestyle and budget. Once you have decided on a home to build, you will generally sign a fixed priced building contract with the builder, detailing the plans, specifications and pricing of your new home.

On this fixed priced building contract (some states in Australia may refer to a fixed priced building contract as a lump sum contract), you will have the final price of the home you are going to build, plus a section listing the progressive payments, as your home gets built. Generally speaking, most building contracts have 3 to 5 progress payments listed on them.

Lets look at an example of what I mean by progress payments. Let say you have just signed your fixed priced building contract, and your home to build costs $160,000. You have already found your block of land, in which you already have a mortgage of $150,000 on the block. You apply for finance to increase your mortgage from $150,000 to $310,000 to build your home. Your home loan is approved.

You now have a home loan of $310,000, but a balance of $150,000, as the new approved extra amount for your home loan, is waiting for the builder to start building your home. On your fixed priced building contract you have 4 progress payments, the schedule of payments may look like this –

Progress payment 1: $30,000 – Lay concrete pad and site works

Progress payment 2: $50,000 – Brick works, to build walls

Progress payment 3: $30,000 – To complete the roof.

Progress payment 4: $50,000 – To finish the home (tiling, paving, finishing’s etc)

This totals $160,000 to build your new home. When your builder is ready to start building, they will issue you a progress payment invoice, to give to the bank or your mortgage broker to start the build. In our example the first progress payment is $30,000. You will receive progress payment requests, as per your progress payment schedule on your fixed priced building contract, till your new home is finished, and by this stage you should be not too far from moving into your new home.

As far as your home loan goes, it will increase as your make your progress payments. In our example, your home loan was $150,000, at the start, as this brought your land. You were approved finance to build, increasing your home loan to $310,000 once the new home has been built.

Once you have made your first progress payment of $30,000, your home loan balance will increase to $180,000. Your second progress payment was $50,000, so once this work is done, and the bank pays the builder, your home loan balance will increase to $230,000. Your 3rd progress payment in our example was $30,000, so once this work is done, and the builder paid, your home loan balance will be $260,000. Once the 4th and final progress payment work is completed, and the builder is paid the $50,000 4th progress payment, your home loan balance will increase to $310,000, which was your approved limit. But this stage you will be nearly ready to move into your new home, once you have done your final inspection.

During construction, you are generally required to make interest only repayments to your home loan. You are only paying interest on the balance of the loan, as the loan increases during building, not the fully approved limit, which in our example was $310,000.

If you have any comments or questions, please leave them below. If you would like more personal mortgage information, or to contact a mortgage broker, please contact us anytime.

Sunday, March 27, 2011

What Is A Seniors Equity Release Mortgage?

Today’s email question is from Ruth In Cottesloe. Ruth asks in her email, I have heard the term Seniors Equity Release Mortgage, what is it?

A Seniors Equity Release Mortgage is the same as a Reverse Mortgage. It is available to people who are 65 years of age, or older. If there are joint loan applicants, one applicant may, with some lenders be aged 60 years of age, or older, as long as there is an applicant that is at least 65.

There is a good article, what is a reverse mortgage, this will give you all the pro’s and con’s about reverse mortgages.

If you have any questions or comments, please leave below. If you would like more personal mortgage information, or to find a mortgage broker, please contact me anytime.

http://www.mortgagefacts.com.au/

Tuesday, March 22, 2011

What Does Equity In My Home Mean?

This is an email question from Stuart in Nollamara – I have heard the term equity, and have been told I have equity in my home. What does the term equity mean?

Equity in your home is basically the difference between the value of your home and the charge, or value of the mortgage held against it. For example, if your home was worth $400,000 and your mortgage held against the property was $100,000, you would have $300,000 worth of equity.

If you do have equity in your home, it can give you many options, if you are thinking about financing something. You may be able to use your equity to purchase an investment property (with no deposit, as the bank uses your equity to support the new property purchase), shares, a business, etc. You may consider other mortgage finance options as well, like consolidating some debt or renovating your home with your mortgage.

You also could consider your equity as savings, or your investment, as it is your real value of what you own in your property.

If you have any questions or comments, please leave below. If you would like more personal mortgage information, please contact me anytime.
http://www.mortgagefacts.com.au/

Thursday, March 17, 2011

How Does A Bank Determine The Value Of A Property?

Today’s email question is from Mark in Claremont, the question asks – I have recently brought my first home, and the bank I used for my mortgage apparently valued the home I brought. How do banks value property? Do they charge a fee for it?

This is a good question. When you purchase a home, or buy an investment property, the bank will organise a valuation of all the properties that the bank or lender holds as security (a security is the property you are buying, and if you own a current home or homes that you have a mortgage on with the bank, the bank will organise a valuation of those properties as well).

Most banks and lenders generally use external valuation companies to value property they are considering for a mortgage. These companies are separate to the bank or lender and are independent companies. The bank or lender uses the property as security, as when you take a mortgage out, the property is the security used to secure the mortgage or home loan.

When a valuer does a property valuation on a property, they look at many factors, when considering what the property is worth. One of the most important things a valuer will consider is, previous property sales in the suburb you are looking to buy in. The valuer will look at the features of your property, like the number of bedrooms, bathrooms, size of the home, land size, the condition of the property, the types of fittings inside the property and other features, like a pool or air conditioning.

The valuer will then try to compare your property will recent sales in the suburb, and what comparable properties have sold for (generally within the last 3 to 6 months) to get an idea of what your property maybe worth. They will generally try and compare your property with around 4 to 6 recent sales, noting the purchase price of the other properties, and whether they are superior, inferior, or comparable to your property. This will help them with the valuation price of your property.

Other ways a bank or lender may do a valuation is called a desktop valuation. This is basically a computer program that looks at the previous property sales in the suburb you are buying in, and compares those properties and their features, compared to the property your are purchasing. This is a computer generated modelled estimate of the value of your property.

The valuation can also protect the consumer as well. As the valuation may give you peace of mind, that you haven’t paid to much for the property that you have purchased.

All banks and lenders have different policies when it comes to decide who pays for the valuation. Some will include the valuation in the mortgage application fee, some will charge a valuation fee separate, and depending on the type of home loan you are applying for, some banks wont charge the valuation fee to you at all.

If you have any questions or comments, please leave them below, or if you would like more personal home loan information, please contact me anytime.

Monday, March 14, 2011

Can A Fixed Rate Mortgage Have An Offset Account?

Today’s email question is from Rae in Leederville. She asks, Can a fixed rate mortgage have an offset account?

There are some banks and lenders that do offer a 100% offset account with a fixed rate mortgage. Some offer a partial fixed rate offset account, whilst most banks or lenders do not offer offset accounts with fixed rate mortgages. Lets look at the differences between the types of offset accounts that maybe on offer with banks or lenders.

A few banks and lenders offer 100% offset accounts against a fixed rate home loan. This means that 100% of the funds in the offset account will offset against the mortgage. For example, if you had $10,000 in your offset account today, and your home loan was $100,000, the $10,000 offsets against the $100,000, meaning that the interest charged on your home loan, will be on the balance (or difference), which is $90,000.

Some banks or lenders offer partial offset accounts on fixed rate mortgages. For example, a lender may offer a partial 40% offset account with a fixed rate home loan. This means that of the balance of the offset account, only 40% of the balance will offset against the home loan. If we use the example above, if you had $10,000 in your offset account, and your lender offers a partial offset of 40% of the balance, the amount offsetting your home loan will be $4,000. There is a big difference between the money you will save, if your bank or lender offered a 100% offset account against a fixed rate home loan.

Most banks or lenders however, generally do not offer offset accounts against fixed rate home loans. It is important to know what the features of your home loan are, and compare it to other options, to learn what is best for your personal financial situation.

If you have any comments, please leave below, or if you would like more personal home loan information, please contact us anytime.

http://www.mortgagefacts.com.au/

Wednesday, March 9, 2011

I Owned A Block Of Land, Do I Still Qualify For The First Home Owners Grant?

This is an email question from Peter in Ferndale. The questions asks, I have previously owned a block of land, which was for investment, I have never brought a home to live in, would I still qualify for the first home owners grant?

Well the good news for Peter is, more than likely yes, you would still qualify for the first home owner’s grant in Western Australia. If Peter didn’t claim the first home owner’s grant, when he bought the land, and have never owned a property he has lived in, you would more than likely still qualify for the first home owners grant.

You may still qualify the first home owners grant (FHOG), if you own, or have previously owned an investment property, provided you have never lived it that property, or claimed the FHOG.

The above scenario may not apply to everyone, so it is certainly worth checking, if you are unsure whether you qualify for the first home owner’s grant. A good mortgage broker should be able to determine whether you still qualify for the FHOG. You can also contact the office of state revenue. Their information can be found at the government website, http://www.firsthome.gov.au/

If you have any comments, please leave them below. If you would like more personal mortgage information, please contact us time.

Sunday, March 6, 2011

What Is A Basic Variable Home Loan?

This is an email question from Vicki in Tuart Hill. I have heard the term basic variable home loan, what is it?

A basic variable home loan is generally a discounted home loan without all the extras some home loans may have. While they generally have a great interest rate, they may not have other home loan features like an offset account, a no annual fee credit card or application fee discounts. Some basic variable home loans do though, as all lenders offer different mortgage products, so it is worthwhile checking with a mortgage broker, the different options available to you.

With most basic variable home loans though, you can pay as much into them as you want, without penalty and have those extra funds as redraw, should you need them in the future. Some banks or lenders may have a fee to redraw from your home loan, and may have a deferred establishment fee if you pay out the home loan completely within a certain period of time (all lenders have different rules). Some basic variable home may also have a monthly fee, which can range from around $8 to $12 a month.

Basic variable home loans can be a good option, the flexibility of being able to pay the loan down faster, with a great interest rate. You may not need all the extras that a fully featured home loan may offer (like a bank or lenders professional packaged home loan), and may save yourself from paying unnecessary fees, like an annual fee.

If you have any comments, please leave below, we love hearing your feedback. If you would like some more personal mortgage information, please contact me anytime.
http://www.mortgagefacts.com.au/

Thursday, March 3, 2011

What Is Redraw With Your Home Loan?

Today’s question is an email from John in Yokine, and he asks what is redraw on a home loan? Do all home loans have redraw?

Lets looks at what redraw on your mortgage is first. Redraw are the funds available in your home loan, that you have paid extra on top of your minimum repayments. For example, if your monthly home loan repayment is $2,000 and you are paying $2,500 per month, the extra $500 may be available as redraw from you home loan.

You may also have redraw available on your home loan if you pay the occasional bulk payment. For example, you may get a bonus payment from your work, of say $1,000. If you pay this into your mortgage, on top of your minimum repayments, you may have the $1,000 to redraw if you need it in the future.

All banks and lenders have different rules when it comes to redraw. Generally speaking redraw is only available on variable rates mortgages, but some banks and lenders do offer redraw on fixed rate home loans. Redraw may not be available on all home loans, if you are unsure, contact me or your bank or lender to find out.

Some lenders may have a minimum redraw from your home loan. For example your bank or lender may have a $1,000 minimum redraw from your home loan. This would mean that you would need a minimum $1,000 before you can redraw from your home loan. Some lenders may also charge a fee for redraw and this can vary from nothing to $50, plus.

Redraw can be a very handy feature with your home loan. It can enable you to make extra repayments, which can pay your home loan down faster, and have those funds available, if you should ever need them.

If you have any comments please leave below, or you can contact me if you would like more personal finance information.

http://www.mortgagefacts.com.au/

Tuesday, March 1, 2011

The Reserve Bank Keeps Interest Rates On Hold.

Some welcome news today for mortgage holders, when the Reserve Bank Of Australia decided to keep the cash rate on hold at 4.75%.

In his statement, Glenn Stevens, Governor of monetary policy noted that the global economy is expanding, led by strong growth in Asia especially. Inflation is consistent with the medium term objective of their monetary policy.

This may bring a little relief over the coming months, as interest rates may stay on hold. Lets Hope so.

The Reserve Bank Statement –

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent.
The global economy is continuing its expansion, led by very strong growth in the Asian region. Commodity prices have risen further over recent months, pushing up measures of consumer price inflation in many countries.  A number of countries have been moving to tighten their monetary policy settings. Overall, though, financial conditions for the global economy remain accommodative.
Australia's terms of trade are at their highest level since the early 1950s and national income is growing strongly. Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices. In the household sector thus far, in contrast, there continues to be caution in spending and borrowing, and a higher rate of saving out of current income. The effects of the natural disasters over the summer have reduced output, but production levels should recover over the months ahead, and there will be a mild boost to demand from the rebuilding efforts as they get under way.
Asset values have generally been little changed over recent months and overall credit growth remains quite subdued, notwithstanding evidence of some greater willingness to lend. Business balance sheets generally are being strengthened, and the run-up in household leverage has abated.
The labour market firmed in 2010, with unusually strong growth in employment and a decline in the rate of unemployment. Most leading indicators suggest further growth in employment, though most likely at a slower pace. Reports of skills shortages remain confined, at this point, to the resources and related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn.
Inflation is consistent with the medium-term objective of monetary policy, having declined significantly from its peak in 2008. These moderate outcomes are being assisted by the high level of the exchange rate, the earlier decline in wages growth and strong competition in some key markets, which have worked to offset large rises in utilities prices. Production losses due to weather are temporarily raising prices for some agricultural produce, but these should fall back later in the year. Overall, looking through these temporary effects, the Bank expects that inflation over the year ahead will continue to be consistent with the 2–3 per cent target.
At today's meeting, the Board judged that the current mildly restrictive stance of monetary policy remained appropriate in view of the general macroeconomic outlook.
If you have any comments or questions please leave below, or if you would like to contact a mortgage broker, contact me anytime.

http://www.mortgagefacts.com.au/