Spring / Summer 2007 Newsletter

Fixed
Awarded to Mortgage
Choic
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NEWS FROM
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MORTGAGE CHOICE Australians may says, “Many people

or
have a reputation are using fixed
for enjoying a mortgages to hedge
September sees Mortgage Choice punt, but a spate against the

not?
proudly celebrating its 15-year of interest rate uncertainty of
anniversary, a milestone of success further rate rises
hikes over the
we are very proud of.
last 18 months that they fear they
It is obvious the mortgage broker has seen many won’t be able to
proposition is appealing to all service on a fixed
home owners
participants when you look at our
take the gamble income.” He also
achievements during that short time –
from the transition to nationwide to the out of mortgage points to “A sharp
2004 Australian Stock Exchange listing repayments by rise in the use of
to continually winning industry awards. opting for a fixed fixed rate loans by
As at 30 June 2007, Mortgage Choice rate loan. It’s a property investors.”
featured 445 franchises, 663 loan strategy that can Interestingly,
consultants, 213 retail outlets and around 100 pay off, but with Australia is one of
corporate staff across Australia. interest rate only a handful of
movements countries favouring
notoriously variable rate
unpredictable, mortgages. Cannex
Gary Mackertichian Anthony Smith Mark Boulton Chris Howitt
it’s worth say the vast majority
Ph: 9585 7779
Fax: 8610 0365
Ph: 9585 7779
Fax: 8610 0365
Ph: 03 9533 5340
Fax: 03 8611 7915
Ph: 9333 4370
Fax: 9333 4376
Mob: 0418 155 565 Mob: 0413 439 761 Mob: 0403 047 147 Mob: 0401 334 599
considering a range of alternate of Americans lock in to a fixed rate,
gary.mackertichian@
mortgagechoice.com.au
anthony.smith@
mortgagechoice.
mark.boulton@ chris.howitt@
mortgagechoice.com.au mortgagechoice.com.au measures to take the sting out of while across the Tasman, around 85%
com.au
rising rates. of New Zealanders fix their home loan.
The August 2007 rate hike – the The appeal of a variable rate
fourth in little more than a year, hurt mortgage lies in the prospect of lower
Craig Micallef
Ph: 9308 9163
Jill O’Connor
Ph: 9585 7779
Mitch Jones
Ph: 9585 7779
Stephen Forrester
Ph: 03 9585 7779
the hip pocket of anyone with a repayments if market rates fall.
Fax: 9308 9257 Fax: 8610 0365 Fax: 8610 0365
Mob: 0417 655 577 Mob: 0412 647 506 Mob: 0412 881 907
craig.micallef@ jill.oconnor@ mitch.jones@
Fax: 03 8610 0365
Mob: 0409 250 347
stephen.forrester@
variable rate mortgage. Those who However with the economy running at
mortgagechoice.com.au mortgagechoice.com.au mortgagechoice.com.au mortgagechoice.com.au
had seen the writing on the wall, and full steam and the Reserve Bank
Mortgage Choice Limited switched to a fixed rate, were able to mindful of inflation, it could be that
302 Charman Road
shrug off news of higher rates. And rates are more likely to trend up
CHELTENHAM VIC 3192
Phone 03 9585 7779 not surprisingly, given our uncertain rather than down. That said, interest
Fax 03 8610 0365 interest rate environment, there is a rate movements can take everyone by
www.mortgagechoice.com.au/cheltenham1 surprise - including the experts.
growing preference among home
This franchise is independently owned and
operated by The Finassist Partnership owners for fixed rate loans. Fixing your home loan interest not
ABN 51 426 348 068 only offers protection from rate rises,
According to independent
researcher – Cannex, around 25% of it also makes household budgeting
all residential home loans are now easier. And if another rate hike is
fixed, up from 17% in early 2006. likely to put your household finances
Cannex analyst, Harry Senlitonga, Continued on p2...

MONEY SAVER TIPS FOR YOUR MORTGAGE

With the recent interest rate rise here are some simple but • Instead of buying your lunch each day make your own instead.
practical tips that can help save you money. • Cut up your credit cards or pay them off in full each
• Plan a clear budget and make sure you follow it. Try using month. Consider reducing your limits.
a simple pocket sized budget calculator such as • Combine multiple banks accounts to save on fees.
Spendtracker to help you. • Put your tax return towards your mortgage instead of
• Review your household and vehicle insurance policies to spending it all.
see whether there are any savings to be made on the • Look for a more cost effective mobile plan and curb your
premiums. Buying on-line can often create savings. mobile calls.

INSIDE • Rental Treadmill • Buying off the plan • It’s your choice winner

...continued from p1
under serious pressure, it may be
worth fixing. Do think carefully about
the fixed term though. The longer the
period, the greater the likelihood
market interest rates could swing
significantly – either up or down.
Rather than fixing your entire loan,
there is always the option of a ‘split’
loan. This provides an ‘each way bet’
providing both fixed and variable
rate components.
To some extent however, the
benefits of fixing may have passed.
According to Cannex, the average
3-year fixed rate is currently around
7.70%, compared to an average
variable rate of 7.59% . This being the
case, it’s worth exploring other options
to manage possible future rate hikes.
A good starting point is to take a
close look at your current home loan
to ensure you are getting the best
possible deal. Refinancing to a cheaper
loan can provide instant savings,
though it pays to be on the look-out
for exit fees. These typically apply in
the first three to five years of the loan,
and in some cases they can outweigh
the savings made by changing to a
cheaper loan.
It may be possible to free up extra
cash for repayments simply by
revisiting the household budget.
Easing back on life’s little luxuries –
termed ‘discretionary’ spending by
economists, can be a simple way to
boost repayments.
It’s also important to re-evaluate all
your debts – not just the home loan.
Even at current levels, mortgage
interest rates are well below those
charged on other forms of debt
including personal loans and credit
cards. Making it a priority to pay these
off, or at least reduce the outstanding
balance, will leave you less exposed
to higher interest charges.
Finally, if future rate hikes
threaten your ability to
meet mortgage
repayments, it’s worth
approaching your lender to
negotiate a manageable
repayment plan. The best
asset you have at this point is
a healthy repayment history,
so take action well before a
payment falls due.
Rental Treadmill
Renting a house or apartment is
an exciting part of moving out of
home, but over the years it can
become a seemingly endless
treadmill, as the money you’d
rather be putting towards a
deposit goes towards paying
someone else’s loan.
But while high property prices can
make owning your first home a
seemingly impossible task, there are
ways of making the process easier.
Traditionally lenders have wanted a
deposit of around 20 percent of the
property’s value, but 100 percent loans
are becoming common. You’ll still need
around 3 percent of the property’s value
to cover legal costs, and lenders will
require you to take out Lenders
Mortgage Insurance to protect their
risk. If you choose this option, then it is
important to understand all the fees
and charges and ensure you can manage
your repayments without financial stress.
But saving for a home isn’t just about
building up a deposit – lenders will
also look for a good savings history to
know that you’ll be able to pay off your
loan regularly.
If you are saving for a deposit, you’ll
need a plan. Paying off and cancelling
credit cards is a priority, as they always
impose a higher interest rate than you
can make on any saved funds. Reducing
your credit limit will also reduce your
apparent risk in the eyes of the lenders.
Ideally you should be saving 10
percent of your pre-tax income, so
analysing your spending will show you
where your money goes and where you
can cut back. That will help you to create
a budget, but the best budget in the world
won’t help you if you’re not disciplined.
It might also be worth moving to
cheaper rental
accommodation
to further boost
your savings.
Setting your sights appropriately is
also important. Your first home does
not need to be your dream home, and
simple renovations to a cheaper home
can add substantial value when it
comes to moving on to your next
property. Looking in areas a little
further out can also save you thousands.
And you don’t need to go it alone
either. People are increasingly
purchasing homes in conjunction with
family members or even with friends.
Some Lenders also offer guarantee
schemes, whereby one family member
may use equity in their home as
additional security for a portion of
another loan. Guarantors must be aware
that they are limiting their own borrowing
capacity until the loan is repaid.
The First Home Owner Grant
provides a one-off payment of $7000 to
owners that meet the eligibility criteria.
For instance, you are not eligible if you
are purchasing a building for
investment purposes, or if you or a
co-owner have owned a house before
July 1 2000. These criteria and benefits
can vary from state to state.
You may also be eligible for a
professional package discount, which
delivers a discounted interest rate in
exchange for an annual fee and
commitment to a credit card and
banking account with the lender.
Qualification for such a discount varies,
but is usually tied to the size of the loan.
The minimum qualification is usually
$150,000, and lenders may discount up
to 0.5 percent on a loan of $500,000.
Some lenders are also offering
joint-equity loans, where the lender
retains part of the ownership of the
property and the subsequent proceeds,
when it is eventually sold, while others
will allow you to roll your HECS fees
into your mortgage and pay them off
together for an additional discount.
Ultimately, every lender has different
products and criteria to determine
whether you qualify for a loan, making
it difficult to make comparisons on an
apples-for-apples basis. Working with a
home loan specialist can not only help
you understand your own situation, but
ease the burden in sifting through the
range of lenders and products out
there, and hopefully get you off the
treadmill and have you owning your
first home sooner.
Planning to buy off
the plan
So a vacant piece of land has
captured your attention and a
‘Home For Sale’ sign has been
erected on the property’s border.
While the foundations are yet to
be poured, already you are
thinking you have found the
location you’ve always dreamed
of. Now could be the time to
consider buying off the plan.
But what exactly does ‘buying off
the plan’ mean? Buying off the plan
means that a purchaser buys the
property before construction of the
project has commenced so decisions
are made upon scale models, strata
plans and a scheduled list of finishes.
The question for many is why buy
off the plan? Some people choose this
purchase method because it allows
people to secure a desired property
within a specific development,
according to Joel Hollis from Elders
Real Estate in metropolitan NSW. And
they may even be able to tailor finishes
to their own taste.
Others favour buying off the plan
because it allows people to secure a
property without having to pay for it
immediately: property buyers enjoy
the peace of mind of having secured a
property ahead of time, says the
President of the Real Estate Institute
of NSW, Cristine Castle.
“It allows people to buy at a
convenient time – and at today’s
prices,” Castle explained.
“Others may feel comfortable
buying off the plan because they have
found a property that is being built
by a builder they know and trust.
Buying off the plan is not for everyone,
however. It demands the ability to
read architectural plans and make
significant decisions without seeing a
property in the flesh,” Castle adds.
When buying off the plan it may be
challenging for some to buy a property
they cannot inspect, too. “Some people
prefer to see, feel and touch things…
others can look at architectural plans
and be comfortable in their decision-
making based on those plans,” she
said. “For others it can prove to be a
very foreign experience,” added Castle.
The purchaser cannot see what the
property looks like, the quality of the
finishes, the layout, the property’s
physical size and dimensions or the
property’s view or even the outlook.
Like any property purchase there are
always pros and cons to be considered.
When buying off the plan there have
been cases where buyers haven’t
necessarily been delivered what they
were promised – such as different
sized living spaces, different finishes
and so on, according to Joel Hollis –
and some projects may experience
time delays, he said. These are all
factors to consider when buying off the
plan. Certainly, buying off the plan is
not a decision that should be made
without conducting thorough research
because you are entering into a
contract to buy a property without
having first been able to view and
assess the finished product.
Be aware too that a valuation “off
the plan” may differ substantially from
the estimated value at completion
Checklist when buying off
the plan:
• Research, research, research.
Investigate past developments
built by the developer you
have chosen.
• Make sure you have a clear
understanding and documentation
of all aspects of the property you
are buying such as room sizes,
finishes and materials.
• Secure a full list of pre-agreed
finishes along with a
comprehensive understanding of
recent sales/comparable sales
and projected rental returns. Get
the complete picture.
• Get a third party involved to help
you read and clarify all the
details of the plan… the process
is all about attention to detail.
• When buying off the plan, the
date for completing the contract
is usually not until the building
is finished and the strata plan is
registered. The buyer usually
pays a deposit and the balance is
paid at the time of settlement
once the building has been
completed.
• Closely check the conditions of
the contract. Seek legal advice on
the benefits or restrictions
provided by the terms of the
contract. For example,
consideration should be given as
to whether there are any
penalties for withdrawing from
the contract. Other questions
worth considering may be: Can I
make changes to the finishes in
the kitchen and bathroom?
Can I select appliances (ovens
and dishwashers) and items such
as floor and wall tiles? Can I visit
the site during construction?
Always read your contract and
seek appropriate legal and other
advice before signing documents
or making payments.
Congratulations to the winner of the
WINNER
Winter/Spring 2007 Mortgage Choice
It’s Your Choice promotion.
Jenny Tucker from Oaklands Park in
SA, has won $6,000.
 Mortgage Choice Limited
302 Charman Road
CHELTENHAM VIC 3192
Win $6,000
Phone 03 9585 7779
Fax 03 8610 0365 towards..
www.mortgagechoice.com.au/cheltenham1
This franchise is independently owned
and operated by The Finassist Partnership
ABN 51 426 348 068

It’s your
8 Tips on how to
reduce theft during an
choice!
Simply call 1800 110 170 to make an appointment with one of our consultants and
open home: request to be entered into the draw.
1. Ensure that you have at You could save $1,000’s in 15 minutes, try us!
least two real estate That’s all the time we need to show you how to get the real savings you want on your mortgage.
agents present. With a Free Mortgage Choice Home Loan Health Check, your local Mortgage Choice consultant can help you
2. Ask all viewers to fill out find out if your current home loan is the most suitable one available or if there are other products out there that
a sign-in sheet with better address your specific needs. With the backing of Australia’s leading mortgage broker - you’re in safe hands.
their identification and • Wide choice: We have many of Australia’s leading banks and lenders on our panel
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3. A real estate agent should • Local knowledge: We’re Australia’s leading mortgage broker because we combine local knowledge with over
14 years experience
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4. Secure and hide all • Fax it to: (02) 9954 4913 or

valuables. • Mail it to: Reply Paid 74789, Mortgage Choice It’s Your Choice Promotion, McMahons Point NSW 2060

5. Reduce the clutter in NAME CONTACT NUMBER

and around your house.
6. Store all your personal ADDRESS POSTCODE
documentation e.g.
bank statements, credit
EMAIL ADDRESS PREFERRED CONTACT TIME
cards, passports.
THE “IT’S YOUR CHOICE” PROMOTION: Call 1800 110 170 to make an appointment with a Mortgage Choice consultant and once you’ve
7. Store all your valuables attended that appointment you’ll automatically go in the draw to win $6,000. There will be 1 draw and the first valid entry will win. Winners will be
and fragile belongings notified by telephone and confirmed by mail. The opening day of the competition is 30th October 2007. All entries must be received by Mortgage
Choice at the above address by 12pm Eastern Standard Time on 29th January 2008. The draw will be held at 4pm Eastern Standard Time for the
away. first draw on 30th January 2008 at the office of Mortgage Choice. The name of the winner will be published in The Australian on the 2nd February
2008. *Complete Terms and Conditions and the privacy notice are available from your local Mortgage Choice consultant or by logging onto the
8. Ensure your public liability Mortgage Choice website at: www.mortgagechoice.com.au. Authorised under NSW Permit No, [LTPS/07/25638], A.C.T. Permit No. [TP 07/03823],
insurance is up to date. VIC Permit No, [07/3968], and S.A. Permit No. [T07/4018].

STATE OF THE MARKET

The June quarter saw the strongest growth in the residential market since 2000 with a 10.2% increase in
Melbourne’s median house price. Price growth was concentrated in the inner city suburbs where the
median price grew by 14% to $650,000.
The other dwelling market showed strong growth as well. Median prices for other dwellings grew
8.8%, reaching a high of $350,000. Unlike the market for houses, there was more consistent growth across
greater Melbourne, with inner city prices growing by 8.8% to reach a median of $397,000, the middle
suburbs by 5.4% to reach $315,000, and outer Melbourne by 6.7% to reach a high of $240,000.
Solid demand is also evident for property in many of Victoria’s regional centres. Geelong had
the most expensive median price of $310,000 and growth of 5.3% in the quarter. Ballarat’s
median price reached $227,500 increasing by 7.1% over the quarter. Bendigo’s median reached
$232,500 increasing by 1.1%.
Written by Real Estate Institute of Australia for Mortgage Choice

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person or entity arising from the use of this information. It is recommended that you seek professional advice relevant to your specific circumstances before acting on the information based in this document.