Viewing by month: July 2010

Dealing with your mortgage to avoid stress

After six interest rate rises since October last year, the past couple of months have been somewhat of a relief for mortgage holders, with the Reserve Bank of Australia keeping interest rates on hold at 4.5 per cent.  But rates won’t stay on hold forever and the RBA has already said that it will lift rates in August if it is uncomfortable with inflation levels. 

For those of you dealing with a mortgage, such uncertain conditions can often be tricky and usually require some forward planning. 

It is generally best to start considering your mortgage when your situation is relatively comfortable and not under stress.  At this point, an honest assessment of your household spending is a great way to arm yourself against future pressures.  By way of example, a rise in interest rates to 4.75 per cent would add $48 per month to a $300,000 mortgage.  By understanding the breakdown of how much you are spending on luxuries compared with necessities, if times get tough you will already know what you can start to cut back on, easing difficulties quickly. 

No matter how comfortable you are with your mortgage repayments, it is generally always a good idea to contribute more to your mortgage when rates are lower.  You will appreciate these  extra contributions if interest rates go up and you find yourself not able to deal as well as you thought you would.  If on the other hand interest rates don’t affect you too much, then these extra payments will simply enable you to pay off your mortgage more quickly, saving yourself interest in the process. 

Many people often get themselves into a spot of bother with their mortgage.  Normal life situations, such as job loss, can arise which understandably make it difficult to meet mortgage obligations.  In these circumstances, the best course of action is usually to sit down and explain the situation to your mortgage lender.  Depending on your lender, and the specifics of the situation, there could be a variety of options available to make things easier for you.   

In any case your lender will appreciate the fact that you have come forward to explain the situation and should work to determine a solution that suits everybody.  After all, a happy mortgage customer is generally always in the best interests of a lender. 

Although interest rates can pose some uncertainty, there are ways to handle your mortgage in a manner that isn’t too stress-provoking.  I would encourage all mortgage-holders to stay on top of things and build equity wherever possible.  CENTURY 21 Home Loans may also be able assist with your home finance questions - for more information, just take a look at the website - http://www.century21homeloans.com.au

 

 


1 comments | Posted by Charles Tarbey on 27/07/2010 at 1:52 PM | Categories: Finance -

What's in a (street) name?

A very interesting study came across my desk the other day that I thought was worth sharing.  Apparently, in the UK, living on a ‘street’ isn’t all it’s cracked up to be. 

A study by the UK property website Zoopla looked at the average property values for each of the 858,000 residential locations in the UK.  It found that properties located on ‘Hills’ and ‘Lanes’ are worth more than the national average, while ‘Streets’ and ‘Terraces’ have the lowest average property values. 

Other value-topping names included ‘Lane’, ‘Mews’, ‘Park’ and ‘Green’, while  ‘Crescent’, ‘Court’ and ‘View’ didn’t fare so well. 

Why the price discrepancy? A simple conclusion to jump to would be that the less common street types represent the pricier places to buy.  But this is not so, according to the study.  The least common of the top 20 street names, ‘Square’, has an average value only slightly higher than the national average, while ‘Lane’ is one of the most common names but still possesses the highest average price tag.   

The study reminded me of some press in Australia that I read awhile ago which considered the effect of street names on house buyers.  Some real estate agents spoke of buyers being put off by certain street names, and gravitating towards others. 

Sound ridiculous? Apparently not to the residents of Bogan Place, Wahroonga in NSW.  So sick of their street sign being stolen, not to mention the negative connotations associated with the word, in 2008 the local council was petitioned and the street was renamed ‘Rainforest Close’. 

What then, is the meaning of such research for buyers in today’s market?  I don’t really think a street name or type should be seriously considered as a deciding factor in a property purchase. 

It is perfectly natural for certain names to resonate well with you, while others may not seem as desirable.  However, there are many other factors that come into play to determine the value of a property and its appropriateness for you. 

Distance from public transportation, schools, local amenities and the city will have much more of an impact on value than street name, and should all be taken into consideration before a decision is made.  


0 comments | Posted by Charles Tarbey on 27/07/2010 at 1:50 PM | Categories: Buying -

The best season to buy or sell property?

I always find interesting the perceptions that people often hold about the timing of buying and selling real estate.  I know of many people who equate cold winter months to a cooler property market and are thus afraid to put their home up for sale, or those buyers who don’t even bother looking.  And then there’s the hype that usually surrounds the Spring Selling Season, where both buyers and sellers gear up for action. 

It’s true that in spring there is a certain buzz in the residential property market air.  For those Australians in the colder states, September brings relief in the form of sunshine and warmer weather.  It is somewhat easier to drag yourself out of bed on a Saturday morning to attend open houses, and the houses themselves, with their gardens in full bloom, often look more attractive.

Having said this, when considering the entire year, you may find it surprising that spring doesn’t actually see the most sales activity.  While spring does generate the greatest number of property listings, sales volumes are actually fairly evenly distributed across all months of the year.

A study conducted by RPData looked at sales volumes between January 2000 and December 2009 and found that on a national basis, the busiest month for house and unit sales is actually March which, on average, accounts for approximately 9.3 per cent of all residential property transactions. 

And despite March being the busiest month for property, there is actually very little variation in sales volumes across the year, with May being the second busiest month (9.2 per cent) followed by July, October and November.  December and January are exceptions to this pattern, with sales declining substantially over the Christmas and New Year period. 

Spring turns out to be the second busiest month for sales activity, however again, the distribution is fairly even.   Autumn attracts the most buyers (26.6 per cent of sales), followed by spring (25.4 per cent), winter (25.3 per cent) and summer (22.7 per cent). 

So what does all of this mean for those Australians who are currently looking to buy and sell residential property? I think these results definitely help to relieve the pressure felt by many to act in September. 

I often hear stories about people who are ready to put their homes on the market, but are reluctant to do so before September because they feel that spring is a more successful period to sell in.  You also see people rushing to get their home ready for a September sale, when a little bit more time spent preparing would put the home in a much better position.  The results of the study show that such beliefs are unnecessary, and that the time of year a property is placed on the market doesn’t necessarily matter as much as many people think it does.

For those people looking to buy, you don’t have to wait around for spring if you are ready to purchase a property now.  And when spring does arrive, don’t be disheartened if you are unsuccessful in buying.  Summer may actually prove to be a time when you could get the best price, given the lower levels of competition. 

 

 


1 comments | Posted by Charles Tarbey on 22/07/2010 at 9:22 AM | Categories:

The benefits of being a property investor at tax time

Well it’s that time of year again.  June 30 has now passed and it is time for all tax payers to get their tax returns in order.  I like to use this time of year to talk about the tax benefits of owning property for investors;  it always surprises me how many people, even current property investors, don’t understand the impact of property ownership on their tax bills. 

One of the main benefits for property investors to consider is the handling of expenses; investors can claim some property related expenses immediately (i.e. at the end of the financial year) and others over periods of time (i.e. depreciate them), as set out in guidelines from the Australian Tax Office.  These expenses can be offset against your income. 

The types of expenses that can be claimed include insurance, land tax, council rates, repairs and maintenance, water charges, body corporate fees and borrowing expenses. 

It is common for some investors to make mistakes when it comes to depreciation, especially in terms of timing the claiming of expenses.  It is important for these to be handled correctly, otherwise the ATO may form the view that the investor is trying to cheat the system.  

Companies such BMT & ASSOC are specialists in the field of property tax depreciation, and can help to ensure that you obtain the maximum possible deduction from your investment property while still being ATO compliant.

The concept of negative gearing is also important when it comes to tax time.  Negative gearing essentially means that the annual rental income from your investment property is not sufficient to cover your investment costs (i.e. interest on the loan in addition to any of the property’s deductible expenses). 

If you are negatively geared you could have the ability to reduce level of income you must pay tax on (by deducting the costs of owning your property from your annual income) and thus the amount of tax paid.

Determining the deductions available to you and maximizing the tax benefits of your investment property can be quite a complex task to get right, but when done correctly could have a significant impact on your tax bill. 

If you have already invested in property, be sure to take the time to prepare your 2009/10 tax return, maximizing your tax deductibility. 

If you are not a property investor, but are in a position to become one, you might like to consider the associated benefits.  Should you make a move into the property market over the coming year, such tax advantages could apply to you also. 


0 comments | Posted by Charles Tarbey on 22/07/2010 at 9:21 AM | Categories:

Easing the strain on your home energy bills

I’m beginning to realise that a technologically enhanced lifestyle doesn’t necessarily benefit our electricity bills.  And the electricity price changes set by the Independent Pricing and Regulatory Tribunal which came into effect at the beginning of July are not going to help matters. 

Given that these changes will see the cost of electricity rise between seven to 13 per cent, it may be worth considering the little alterations that can be made on a day-to-day basis to help reduce the effect that such increases will have on your family’s budget. 

To begin with, the plasma television is the biggest energy consumer in the home.  I know of many households who have the television running much of the day, just to have something on in the background.  What they don’t realise is how much this can contribute to their energy bill. 

Try to get into the habit of turning on the TV only when you are actually watching it.  Also, physically switch the television off, rather than just switching it onto standby with the remote control.  These changes could contribute to substantial reductions in your monthly bill. 

Turning off your lights is another important energy reducing task.  According to Cnet Australia, the common household 60W light globe consumes $5.96 worth of electricity per month! If you consider all the light globes that exist in one house, this can add up to quite a significant expense.  By simply getting into the habit of turning lights off as you leave a room, and installing dimmer switches to turn them down at night-time, your electricity bills could benefit. 

Leaving the household computer on over long periods whilst you’re not using it (i.e. when you are at work or asleep), can also unnecessarily add to your bills.  You don’t have to turn it off; the simple act of activating the automatic sleep mode setting can save you quite a bit of money per year that I bet you didn’t even know you were spending. 

While these ideas are starting points, there are also many other easy ways to reduce your energy consumption.  These reductions don’t necessarily require huge sacrifice; they are often just different ways of thinking which could end up saving you a fair bit over a relatively small period of time. 

 


1 comments | Posted by Charles Tarbey on 07/07/2010 at 9:58 AM | Categories:

Some reasons to consider owning over renting

We’ve been hearing a lot in the media lately about housing affordability worsening and the preference of many to rent as opposed to buying property. 

Buying a home is a significant investment; for those used to renting it can sometimes be difficult to comprehend the financial outlay involved in making such a purchase.  Many people I have come across are uncertain about the direction of interest rates, and worry about landing themselves in an expensive mortgage.  Some would rather the ease of simply paying their weekly rental amount. 

This is completely understandable – I think most people have worried about their mortgage at one point or another.  However, the way I see it, mortgage payments are very similar to rental payments, with one difference. 

Rent lacks the predictability that a mortgage repayment represents.  If you opt for a fixed-rate mortgage, you can plan out your repayments in advance for quite a substantial period of time.  Rent on the other hand can change depending on the length of your lease arrangement and is affected by market conditions.  If for some reason you must leave your rented property, there is no guarantee that you will be able to find a similar place for the same price. 

Every mortgage repayment made is a regular contribution, and after a period of time you will own a substantial investment.  If you wish to do so, this investment can be liquidated, and when sold is often worth more than the sum of your repayments (including interest). 

When renting, on the other hand, you are making the same regular contributions, however you will never see the money again. 

Putting talk of money aside, there’s something quite satisfying about owning your own home.  You own your walls, can paint them any colour, hang anything on them, or even knock them down if that’s what you feel like doing.  Landlord inspections or maintaining maintenance standards will never be events that you have to deal with. 

Owning your own property is not for everyone, but can definitely be worth the effort and saving.  The way I see it, with rental payments in many cases equalling mortgage repayments, buying should be at least considered as a very real and financially sensible option.


0 comments | Posted by Charles Tarbey on 05/07/2010 at 9:29 AM | Categories: Buying -