Winter / Spring 2008 Newsletter

OUR TEAM AT
MORTGAGE CHOICE

Anthony Smith Gary Mackertichian Mark Boulton

Ph: 03 9585 7779 Ph: 03 9585 7779 Ph: 03 9533 5340
Fax: 03 8610 0365 Fax: 03 8610 0365 Fax: 03 8611 7915
Mob: 0413 439 761 Mob: 0418 155 565 Mob: 0403 047 147
anthony.smith@ gary.mackertichian@ mark.boulton@

Back to basics
mortgagechoice.com.au mortgagechoice.com.au mortgagechoice.com.au

Higher interest rates are putting Despite the potential savings of a

Chris Howitt Craig Micallef Jill O’Connor
Ph: 03 9333 4370 Ph: 03 9308 9163 Ph: 03 9585 7779 ‘good value’ firmly at the top of basic loan, it is worth checking the sort
Fax: 03 9333 4376 Fax: 03 9308 9257 Fax: 03 8610 0365
Mob: 0401 334 599 Mob: 0417 655 577 Mob: 0412 647 506 borrowers’ wish lists, and while a of features that are available as there
chris.howitt@ craig.micallef@ jill.oconnor@
mortgagechoice.com.au mortgagechoice.com.au mortgagechoice.com.au ‘basic’ loan offering a low rate can may be restrictions.
prove tempting, the additional
While standard loans come with all
features of a standard variable loan
the bells and whistles, Senlitonga
can provide convenience.
cautions borrowers to only pay for
According to Harry Senlitonga, those features they’re likely to use. He
senior analyst with research group says offset accounts, which work by
Shaun Curtis Mitch Jones Stephen Forrester Cannex, the line between standard reducing the loan interest in line with
Ph: 03 9585 7779 Ph: 03 9773 3438 Ph: 03 9773 3438
Fax: 03 8610 0365 Fax: 03 8610 0365 Fax: 03 8610 0365 variable and basic home loans is funds accumulated in the offset, offer
Mob: 0423 720 340 Mob: 0412 881 907 Mob: 0409 250 347
shaun.curtis@ mitch.jones@ stephen.forrester@ becoming blurred. Many basic loans the potential for generous savings. Yet
mortgagechoice.com.au mortgagechoice.com.au mortgagechoice.com.au
offer extras like redraw facilities and the Cannex research shows the average
Mortgage Choice Limited option of additional repayments. A key offset account has a balance of just
302 Charman Road distinction according to Senlitonga, is $2,000 or less - a sum Senlitonga says
CHELTENHAM VIC 3192 the availability of offset accounts, which is unlikely to significantly impact the
Phone 03 9585 7779 typically are only available with loan interest, and which doesn’t justify
Fax 03 8610 0365 standard loans.
www.mortgagechoice.com.au/cheltenham1 paying the higher rate.
This franchise is independently owned and The extra features of standard
Further clouding the distinction
operated by The Finassist Partnership loans do generally come at the cost of
ABN 51 426 348 068
between standard loans and their basic
a higher rate. According to Cannex’s
counterparts, Harry Senlitonga says
Harry Senlitonga, “Rates on standard
many lenders are folding standard
variable loans range between
variable loans into a ‘package’ combining
about 9.44% and 9.47%. By
a mortgage, a fee-free transaction
comparison, a basic home loan can
cost around 8.8%.” Continued on p2...

MORE THAN JUST 100 POINTS

Applying for a home loan takes some organisation.
When you submit your application you will need
supporting documentation confirming your identity and
substantiating your income, so make sure you have your
driver’s licence, credit card, passport, Medicare card or other
suitable documents within reach.
You’ll also need at least two consecutive payslips, or if
you are self-employed, your last two tax returns, and
possibly a profit-and-loss statement and your accountant’s
contact details.
If you receive income from other sources, such as a share
portfolio or a pension or other benefit, gather details of those
also. Lenders will also want a statement of assets, such as
vehicles or savings. And finally, your lender will want to know
about any outstanding liabilities you have, including personal
loans, credit cards or other debts such as HECS.

INSIDE • Loan V Loan • Sharing a mortgage • Return of the investor • Mortgage Brokers
 Sharing a
...continued from p1
account and a credit card. The appeal

mortgage
of these packages is a discounted
interest rate though as Senlitonga points
out, “Package loans come with annual

fees - usually $300 to $400 each year.
This makes it important for borrowers
to weigh up whether they will get
better value from a package rather
than opting for a basic home loan
with a separate everyday account
and a low rate credit card.”
Drafting a short list of
loan features you’re likely
to use is a worthwhile first
step in determining the loan that’s
right for you. If, for example, you’re
unlikely to have spare cash, options
like extra repayments or an offset
account may be unimportant. It’s also
worth enquiring about any deferred
establishment - or exit - fees,
applicable if the loan is paid out early.
These fees, which can be exorbitant
on some basic loans, could lock you
into a mortgage that no longer suits
your needs – or budget.
Checklist – what to consider when
choosing a home loan
• Only pay for loan features you’re
likely to use.
• Does the loan offer ‘portability’,
allowing you to transfer the loan
between properties at no extra charge?
• Are extra repayments permitted? Is
there a fee?
• Is a redraw facility available?
• Are you able to split the loan into
fixed and variable components?
• Do you use other services from the
lender – could you use this to
negotiate a better rate?
* Interest rates used in this article were current
as at 3rd June 2008.
with family
With housing affordability affecting
many first homebuyers today, it’s
becoming increasingly common for
Australians to share their mortgage
commitments with a family member.
This can be a great strategy to
overcome soaring rents and rental
property shortages.
Joint borrowing makes it easier for
people to afford their own home as it
may allow you to access more funds
than you may have been eligible
for without the assistance of
another borrower.
Joel Hollis, a real estate agent with
Elders, purchased a home unit with his
brother and described the decision to
buy with family as a positive one.
“I found that sharing the costs with a
family member provided the financial
security I needed and gave us access
to properties that we would otherwise
have not been able to afford on our
own. Increasing the amount of money
we could borrow [due to dual incomes
and shared savings] certainly gave us
wider options,” he said.
Joint borrowing may not be suitable
for all property buyers, although it is an
option to consider when entering the
property market.
Another common practice to assist
first homebuyers get their foothold in
property is for parents to act as
guarantors for their children by
using the equity in their own
home. With this type of loan, the
homebuyer’s mortgage is secured
against the equity in a family member’s
property, which provides additional
security for the loan amount.
So, the guarantor is in a position to
help the applicant maximise the amount
they can borrow, which reduces upfront
savings for the deposit and means the
applicant may reduce or avoid paying
lenders mortgage insurance (LMI), which
can amount to thousands of dollars.
Anyone who is considering purchasing
property in any partnership should seek
legal advice regarding the arrangement.
Mortgage Choice recommends that
each party, regardless of their
relationship status, seeks the advice of
a lawyer who can draw up an
agreement. This ensures that both
parties are aware of their responsibilities
and protects the financial interests of
both parties. It also removes the
likelihood of potential challenges or
complications down the track, should
the partnership come to an end or
change over time.

BASIC VARIABLE LOAN VERSUS STANDARD VARIABLE LOAN

LOAN TYPE TYPICAL RATE* EXTRA REDRAW OFFSET SPLIT LOAN PORTABILITY
CONCESSION REPAYMENTS FACILITY
COMMENTS Consider A useful way to Can be used to Allows borrowers to Combines fixed Lets borrowers
‘comparison’ rate, reduce the overall reduce loan interest reduce loan interest and variable rate transfer the loan to
which includes loan interest and but may come with by accumulating components within a new property at
upfront plus term. extra fees. savings in a linked a single loan. no extra charge.
ongoing loan fees. ‘offset’ account.

BASIC Average of around Offered on some Offered on some Not usually May be available. Offered on some
8.8%. loans. loans. available. loans.

STANDARD Average between Usually a standard Usually a standard Usually a standard Typically a standard Usually a standard
VARIABLE about 9.44% and feature. feature. feature. feature. feature.
9.47%.
* Source: Cannex * Interest rates used in this table were current as at 3rd June 2008.
Return of the investors
Recent volatility in international share markets has led There are some tips to think about when buying
some investors back to the relative security of property. an investment property. It is important to consider
But buying an investment property requires different what tenants will want from the property
considerations to buying a home. in terms of convenient access to
facilities, but they are generally geared
As always, the options are going to be shaped by how
towards short-term thinking. So tenants
much you are willing and able to spend. If money is tight, the
may not mind if a property faces a main
most popular investment property is a unit. These can still be
road, but that may count against it
found in the $300,000 and upwards bracket, which is
when it comes time to sell.
sufficient for a two bedroom apartment in a 1960s or
1970s-style block. But the cheaper entry point also translates If you are looking to buy an
to a slower appreciation in value. apartment in a small development
without an elevator, then first floor
The alternatives are to buy in a lower-priced area and hope
properties are most appealing, as too
that it rises significantly, or to buy a run-down property and
are developments with an
renovate. The first of these options is high risk, as lower-priced
entry hall, individual laundry
areas do not always rise at the same rate as their affluent
facilities and a lock-up
neighbours. When buying a ‘fixer-upper’, the condition of the
garage (as opposed to just
property and amount of work required may significantly restrict
a parking space). For a

WINNER
Congratulations to
its appeal to tenants, and hence its capacity to earn income. the winner of the
single-fronted cottage, the
Summer / Autumn
According to James Tostevin, a Melbourne-based properties that surround 2008 Mortgage
auctioneer with agents Marshall White, apartments, villas and it need to be taken Choice It’s Your
townhouses represent great investment buying, as they come into account. Choice Promotion.
with less maintenance.
Then of course the
Mr Sholl Daszek of
“But realistically the capital growth has not been quite as standard question of what Chiswick in NSW
great as a single-fronted cottage or a house on a smaller other properties in the neighbourhood has won $6,000.
parcel of land,” Tostevin says. “The condition of the property have been selling for over a period of
reflects the type of tenants that you get.” time is a good guide to returns.

MORTGAGE BROKERS: the simple choice

An increasing number of
Australians are securing their
home loans through mortgage
brokers. In fact, around 40% of
new residential loans are now
issued by mortgage brokers.
Part of the popularity of
mortgage brokers is that not only
will mortgage brokers assist you
with selecting a suitable home
loan for your needs, but brokers
will also assist you throughout the
life of your loan: from securing it for
you, doing the paperwork, plus
managing the legwork during
the property purchase process,
right through to settlement
- and beyond!
Ultimately, mortgage brokers will be
there for you throughout your property
buying cycle. Loan products and features
are changing constantly so it’s a broker’s
responsibility to keep abreast of market
changes and keep you suitably informed.
If your financial circumstances
Got a cash windfall? A broker can assist
you with maximising this windfall in
relation to your home loan, or switching
you to a more suitable product to suit
your new financial situation.
Or, if you are thinking of renovating,
your local broker can review whether
you can access more funds, extend
your loan term, for example, or switch
Brokers can also assist you
through challenging financial
times, such as when interest rates
rise - reviewing whether you may wish
to fix all, or part of your loan.
Mortgage brokers have access to an
extensive panel of lenders (banks,
building societies and credit unions),
which gives Australians the choice of
hundreds of different loan products.
Brokers such as Mortgage Choice can
assist you select a loan that meets your
lifestyle and financial requirements, as
well as giving you the features you want.
Importantly, Mortgage Choice loan
consultants don’t charge for their
services – so you can be assured that
they have your best interests in mind.
They are paid the same commission
regardless of the lender or loan product
chosen*. Call 13 MORTGAGE today to
find out more.
*This information refers only to loans provided by lenders
with whom Mortgage Choice has an arrangement under
which it receives commissions and other payments. There
are up to 28 lenders on the Mortgage Choice panel.

change, your broker can assist you. to a more suitable loan.

 Mortgage Choice Limited
302 Charman Road
CHELTENHAM VIC 3192 ESCAPE ON YOUR
DREAM HOLIDAY
Phone 03 9585 7779
Fax 03 8610 0365
www.mortgagechoice.com.au/cheltenham1
This franchise is independently owned
and operated by The Finassist
Partnership ABN 51 426 348 068 with $6,000 to spend at Flight Centre

Simply call 1800 110 170 to make an appointment with one of our
consultants and request to be entered into the draw.
At Mortgage Choice we make getting started simple, from finding a home loan that suits you, to taking
MORTGAGE CHOICE you through the whole application process. Whether you are buying a new home, refinancing, consolidating
IN THE COMMUNITY debt, investing in property or financing a renovation, talk to the specialists. Mortgage Choice offers:
Mortgage Choice is proud to • Wide choice: We have many of Australia’s leading banks and lenders on our panel who offer
have worked with Barnardos collectively hundreds of home loan products
Australia since 2006, • Professional home loan advice
providing a simple but
• Local knowledge: We’re Australia’s leading mortgage broker because we combine local
effective tool to tackle
knowledge with over 15 years experience
poverty - the Munch Box.
Each box created and Call now on 1800 110 170 or fill in your contact details below and
packed by Mortgage Choice • Fax it to: (02) 9954 4913 or
staff contains a simple and • Mail it to: Mortgage Choice Escape On Your Dream Holiday Promotion,
nutritious recipe along with Reply Paid 74789, North Sydney NSW 2060
non-perishable food needed
to prepare a meal for a NAME
disadvantaged family.
The Munch Boxes not only
STREET
provide food to children,
young people and their
families, but are also used SUBURB POSTCODE
as a tool to educate family
members in how to prepare
nutritional, economical and EMAIL CONTACT NUMBER

child appropriate meals.

ESCAPE ON YOUR DREAM HOLIDAY PROMOTION: Call 13 MORTGAGE to make an appointment with a Mortgage Choice consultant and once you’ve attended that
appointment you’ll automatically go in the draw to win $6,000 deposited into a Flight Centre account in your name. There will be 1 draw and the first valid entry will win.
We feel strongly about giving Winners will be notified by telephone and confirmed by mail. The opening day of the competition is 1st of August 2008. All entries must be received by Mortgage Choice
back to Australians and our at the address above by 9am EST on 3rd of November 2008. The draw will be held at 4pm EST on 4th of November 2008 at the offices of Mortgage Choice. The name
association with Barnardos of the winner will be published in The Australian on 7th of November 2008. Complete terms and conditions and the privacy notice are available from www.mortgagechoice.
com.au. Authorised under NSW Permit No. [LTPS/08/04986], A.C.T. Permit No. [TP 08/02100], VIC Permit No. [08/2366], and S.A. Permit No. [T08/2033].
helps us accomplish that.

STATE OF THE MARKET

The REIV March quarter median prices confirm that the four successive interest rate
increases over the last 8 months have had an impact on Melbourne house prices.
The median price for a detached home in Melbourne in the March quarter is now $432,500,
down 8.4 per cent from the December 2007 median of $472,250.
Increasing interest rates, coupled with the changing economic conditions have affected
confidence, transaction numbers and clearance rates all of which have combined to cool the
market since the beginning of 2008.
As a result the first three months of 2008 has seen the Melbourne residential property
market return to a stable and sustainable level.
Written by Real Estate Institute of Australia for Mortgage Choice

Privacy: There will be occasions where we would like to send you valuable information directly related to property finance, as well as other related offers, tips and opportunities. However should you wish to
receive only certain types of information or nothing at all, please contact your local franchise principal. Disclaimer: The content of this newsletter is written expressly for education purposes and is based on
the opinions of the authors. The authors and agents for the authors are unable to accept any liability or responsibility whatsoever to any error or omission or any loss or damage of any kind sustained by a 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.