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Q: Hi, we're Melbourne residents looking to buy our first home. We saw an apartment and we have 20% deposit. However, we found out that the property is leased til June 2018. Some lenders said they only approve if the property has under 6 months of lease left. One lender agrees to approve our loan but in investor's rates until we take over the property in June 2018, then they will convert to owner occupier rates. Is this legal? Also, do we still get stamp savings as first home buyers if we proceed?
A: There is an exemption for stamp duty up to $600,000. That applies by the same criteria I mentioned before, which is that you live in the property within 12 months for a minimum of a 12 month period. If the property is worth more than $600,000, you’ll pay some stamp duty up to $750,000 when the stamp duty becomes normal.
If you would like to discuss this further, please call me on 0410 623 444.
Cheers
Dean
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Q: Hi, we're Melbourne residents looking to buy our first home. We saw an apartment and we have 20% deposit. However, we found out that the property is leased til June 2018. Some lenders said they only approve if the property has under 6 months of lease left. One lender agrees to approve our loan but in investor's rates until we take over the property in June 2018, then they will convert to owner occupier rates. Is this legal? Also, do we still get stamp savings as first home buyers if we proceed?
A: Hi Fae
Given the property is going to be an investment property at settlement, the lenders will regard it as an investment loan and therefore you will have the higher investment rates. However, normally the banks will let you switch back to owner-occupied after a 6 or 12 month period (depending on the lender) if you can demonstrate that you have actually moved into the property at a later stage. This is entirely legal as it is up to the lender to decide their own rules as to when they will allow people to switch.
In terms of stamp duty for first home owners, in Victoria the requirement is normally that you intend to live in the property for at least twelve months starting within twelve months of when you buy the property (i.e. it doesn't have to be from day one). If you can move in by June 2018, there should generally be no problem.
If you wanted to discuss in more detail, feel free to send me your contact details through here or come to our website at mortgagedirect.com.au and start a chat with me.
Cheers
Dean
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Q: We live and operate our business on 100 acres in the Hunter Valley. We’ve been with the same bank for many years but they keep raising the rates and we would like to ask if we go to refinance will other lenders look at our security or is it just the big banks?
A: Hi Anna
The limit for most banks is about 50 hectares (about 123 acres) for residential property for most lenders (not just the big banks). It sounds like you might be running a business off it. We'd need to understand a bit more about the property, and then we could talk to the banks about it for you.
You're welcome to visit mortgagedirect.com.au and start a live chat with me there if you wanted to discuss it further.
Best regards
Dean
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Q: Had a few credit issues… is there a minimum credit score you can have and still qualify for a home loan?
A: Hi Leigh
Normally we can find a solution for most people, even if it's at a specialist lender. If you'd like to discuss further, feel free to visit mortgagedirect.com.au and start a chat, and I can discuss further with you.
Cheers
Dean
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Q: I’m a first home buyer and would like to know how to plan ahead for rate increases. Is there a way to calculate or budget to make sure I can still make the repayments?
A: Hi Nikki
There's a few ways to solve for this. The first step is to work out how much your repayments will go up if your interest rates increase. You can do this by using a repayments calculator (use a 30 year loan as that is probably what you are on) to calculate what your loan repayments will be each month. You can change the interest rate to see how much your repayments will go up to if there is an interest rate increase. Here's a calculator on our website that you can use:
http://mortgagedirect.com.au/loan-repayments/
(you can put in one interest rate on the left, and a different rate on the right to compare two loans)
Next, you can put together a monthly budget to work out how much you're spending each month. If you co back through your credit card statements or your bank statements, you can normally get a pretty good idea of what you're spending money on.
Here's our budget calculator that you can fill in to help you with that:
http://mortgagedirect.com.au/budget/
Finally, if you're worried about increasing interest rates, you might want to consider getting or switching to a fixed rate loan - they can help you sleep at night by locking in the rate for a 1-5 year period.
I'm not sure if you have a loan already or not, but if you'd like us to help you with all of the above, we'd be happy to. You can our request details here or start at live chat with me now at www.mortgagedirect.com.au.
Cheers
Dean
Dean Gillespie
MortgageDirect
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Q: My investment property has an interest only loan and the bank has just increased the rate quite a bit…the property is working as ok as it has negative gearing but should I change the loan to principal and interest to get a better rate?
A: Hi Leo
That's a good question. By paying principal and interest, you'll get access to a lower interest rate which means that you are actually paying less out in actual dollars in terms of interest payments. However, you'll also reduce the tax deductions that you can deduct (as the result of you making a smaller loss on your property). Because the net loss you make on your property is basically the rent earned less any interest you pay (as well as all your other costs), if you reduce the interest you are required to pay, you'll also reduce the amount of any deduction you can claim on your tax.
Normally, the actual cash flow saving from reducing interest will be higher than any loss in tax deductions, because your tax paid is only a proportion of the profit or loss you're making.
If you want us to go through your specific scenario, we can work through the numbers for you and talk to you about your best options. If you'd like to do this, feel free to contact us through here, or you can chat to me live at mortgagedirect.com.au.
Cheers
Dean
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Q: I'm a single parent of 2 teenage kids and have never owned a home.
I would like to know the best way of going about this?
Thank you
A: Hi Emma
That's a great question and there are a few stages to buying your first home. The good news is that it's not that hard if you know what they are and have someone to help you!
The first step is to get a realistic understanding of what you can afford to buy, so that you can know with confidence that you will be comfortable with your loan once you buy the property. In order to find this out, the best way is probably to sit with a mortgage broker who can work through this with you.
There are two main things that define how much a bank will lend you. The first is the value of the property that you are buying, and the other is what you can afford to repay. A bank might be prepared to lend you say 95% of the value of the property, which means that you would generally need to have saved up the 5% as a deposit. You will also need to have saved up enough money to cover some other costs, like stamp duty and the legal costs of the settlement.
The second (and probably more important) consideration is how much you can afford to pay. You will need to work out how much spare income you can afford to pay, and then we can calculate how much loan you can afford to get (and therefore how expensive a property you can afford to buy). It's really important that this is done properly, as you want to ensure that you are comfortable with your loan and you can sleep at night!
After these two things have been worked out, the process basically looks like this:
1. Apply for a pre-approval through your broker with a bank. This means that the bank is basically happy with your loan scenario and you as a customer;
2. Start looking around for a property of the relevant value (as well as being what you like);
3. Make an offer on the property. We would then apply to the bank to get the final full approval;
4. Sign the contract for the property; and
5. The property "settles" - which basically means your deposit and the bank loan is paid to the owner of the house, and it becomes yours.
It's all pretty easy once you know how it works.
We'd be delighted to assist you at MortgageDirect if you liked. There is no cost from MortgageDirect for the service. Please feel free to contact us through here if you would like to touch base (we also have webchat online now on our website if you want to talk to us through that).
Good luck!
Dean
Dean Gillespie CertIV BEc MFin
mortgagedirect.com.au
