Looking after your mortgage

Here are three timely pieces of mortgage advice that could help you make the most of your new home loan, according to Allison Tait of Ninemsn Finance.

Firstly, for new home loans after July 1st 2011, home loan exit fees will be banned.

The ban was announced by the federal government in March and applies to fees charged when you pay our or switch from a home loan within a few years of signing the loan contract.

Secondly, make sure you include a buffer of two per cent in your budget when considering taking out a new home loan. This is primarily to hedge against rising interest rates.

“The average first home buyer is paying around $164 more per month in mortgage repayments compared to 12 months ago – which has a big impact on the family budget,” notes RateCity chief executive Damian Smith.

Ms Tait’s last piece of advice is to talk about the options if you are finding it difficult to meet your mortgage payments.

It may be possible to invoke a hardship variation – such as permanently reduced payments, varied or postponed repayments – if you can agree this with your lender.

To be eligible for such an arrangement your home loan must be under a certain amount and your inability to make repayments must be because of a valid reason, such as unemployment or illness.

But make sure to check whether any extra fees will be incurred.


Brisbane flood map may guide home loan seekers

Several flood maps published by Brisbane City Council could provide useful guidance for home loan seekers planning a property purchase in the Queensland city.

The maps identify the 2011 flood water level for more than 60,000 Brisbane properties and the city’s lord mayor commented that they will provide residents plenty of potentially useful information about areas where they want to buy, rent, build or renovate property – as well as the homes they currently live in.

However, lord mayor Graham Quirk encouraged residents to consult a surveyor before undertaking any specific work, as professionals are best placed to test the land’s natural levels.

The publication of the reports this week is part of several local government measures taken in response by local government after January’s devastating floods.

“The reports will give residents information around habitable floor areas, so if people are looking to undertake work on their properties or if they want to raise their properties, these flood reports will give them the information they require,” Mr Quirk commented to the ABC.

According to the chairman of the Real Estate Institute of Queensland, recent home loan take-up figures in the state are encouraging.

Pamela Bennett commented that compared with January figures, February saw a rise in property market activity.


‘Improved assistance’ for seniors seeking home loans

The Real Estate Institute of Victoria (REIV) has praised the “improved and increased assistance” for seniors looking to buy a property in the state.

According to the organisation, there are a number of obvious benefits to “removing artificial barriers to downsizing” – including stamp duty.

The REIV asserted that stamp duty can act as an artificial barrier to moving – for example, if you are looking to move into a smaller property, you could face costs of up to $30,000 on an average home.

This can make things particularly difficult for older buyers who may be retired and living on a fixed income – a group which is also likely to be interested in downsizing as their adult children have flown the nest.

Under new laws set to take effect on July 1st, the current duty relief threshold is set to rise from $440,000 to $750,000, which would see qualifying individuals receive a partial exemption from the levy.

Furthermore, some eligible seniors will be able to qualify for a total exemption if the value if their home is less than $330,000.

Commonwealth Seniors Card holders will also be eligible for the discounted rate.

Earlier this week, the REIV asserted that first-time buyers looking for a new home loan may already benefit from a stamp duty reduction, as this is paid on the date the property purchase is settled.

If settlement occurs after July 1st, buyers will be entitled to the new rate.


Home loan size ‘remains stable’

The average home loan size remains stable, in spite of lingering economic uncertainty, according to a JP Morgan economist.

Speaking to the AAP, Ben Jarman commented that steady home loan sizes are indicative of a healthy market.

The first-time buyer category is particularly stable, he explained, adding that this is normally the first market to show any signs of financial stress.

He added that figures showing a reduced demand for home loans in the past couple of months should not “ring alarm bells”, particularly given the property market’s strong performance in recent years.

First-time buyers will need to take a number of factors into account before they apply for their new home loan.

They may wish to check to see if they qualify for financial assistance – government grants of $7,000 are available for those purchasing their first home, while other funding is available in the state of Victoria for those who are buying or building a new property.

The Real Estate Institute of Victoria recommends that first-time buyers contact their State Revenue Office for more information about financial assistance requirements.

New home buyers will also need to take into account borrowing costs, including mortgage insurance, their loan establishment fee and stamp duty, before they apply for a home loan.

Other factors that could affect buyer costs include legal assistance, building reports or valuation reports, as well as pest inspections.


Governments ‘must work together’ on housing costs

The federal and state governments need to work together to reduce the costs associated with purchasing a new home, according to the Housing Industry Association.

The voice of the Australian residential building industry asserted that steady interest rates and reforms to policies and processes are key to improving the Australian housing market.

Reforms could cut the “excessive costs of new housing” and possibly make it easier for first-time buyers to access new home loans, Matthew King, HIA economist, commented.

The Reserve Bank of Australia (RBA) decided to hold interest rates steady at 4.75 per cent for the fifth month in a row this week, in a move that was applauded by economists.

Tim McKibbin, chief executive officer of the Real Estate Institute of New South Wales, noted that the decision was wise, particularly in the wake of natural disasters in many parts of the country earlier this year.

He urged the RBA to continue to assess the interest rate on a month-by-month basis, adding that a sensible decision would be to maintain steady rates for the foreseeable future.

Some economists predict a rate increase of between 0.25 per cent and one per cent in the next 12 months, but Mr McKibbin stressed it is important to keep rates steady to foster economic recovery in Australia.


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