Government relocation plan a farce'

Government relocation plan a farce'

The New South Wales government’s $188 million plan to encourage regional relocation has been labelled a “farce” and “a waste of funds” with fewer than 2000 home owners taking advantage.

The Regional Relocation Grant offers residents in metropolitan areas such as Sydney, Newcastle and Wollongong a $7000 incentive to move to regional NSW.

The four-year scheme has been capped at 40,000 grants, but figures from the Office of State Revenue show just 1363 grants were provided across NSW between June 2011 until October last year. And an embarrassing loophole has meant that you only have to move one suburb away to cash in – which is what the bulk of buyers have done, according to reports.

The figures have prompted Keira MP Ryan Park to brand the plan a “farce” calling on Premier Barry O’Farrell to step in and axe the grants scheme.

“The government should be embarrassed that individuals are paid $7000 to move what’s literally across a bridge…when the community is crying out for important infrastructure and services,” he said.

Minster for the Illawarra Greg Pearce acknowledged the uptake of grants was disappointing: “The Regional Relocation Grant is designed to encourage people to make a sea or tree change and are an attractive incentive, particularly for those families already considering a move from large cities to regional areas.”

“While the uptake of these grants is disappointing, the NSW government will continue to work to encourage growth in regional areas, generating jobs and stimulating local economies.”

The truth about a sea or tree change

Swapping congested city streets for a sea breeze or a breath of fresh country air sounds idyllic. More affordable housing options can be a big drawcard to leave the cities, too, with the added bonus of reducing your home loan burden.

But is a sea or tree change all it’s cracked up to be?

The National Sea Change Taskforce estimates over the next 15 years 1 million city slickers will trade in the daily grind for a more peaceful existence. But of those who do make the shift around half, sooner or later, go back to where they came from.

So why the about face?

Andrew Winter, host of Selling Houses Australia, says tree changers and sea changers tend to fall in love with the place while they are on holidays.

“The practicality of living in a small community is very different from enjoying a few weeks of living the life of luxury,” he said.

Jobs are often harder to come by, he said: “Unemployment is often 10 percent higher in tree change and sea change locations compared to more populated areas.”

Tips for relocating

So how can you avoid making a very expensive mistake?

Do your homework, says Winter.

“Visit an area at different times of the year because it can feel very different in the depths of winter to the glorious days of summer,” he said. “And whilst you’re there speak to the locals – they are the ones who will give you the real low down on their sleepy little town.”

Finally, he says, have a sensible financial plan: “Secure a job before you move and try renting for a while and see if they place is the right fit.”

 

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Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

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Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

Can I get a home loan if I am on an employment contract?

Some lenders will allow you to apply for a mortgage if you are a contractor or freelancer. However, many lenders prefer you to be in a permanent, ongoing role, because a more stable income means you’re more likely to keep up with your repayments.

If you’re a contractor, freelancer, or are otherwise self-employed, it may still be possible to apply for a low-doc home loan, as these mortgages require less specific proof of income.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

Is there a limit to how many times I can refinance?

There is no set limit to how many times you are allowed to refinance. Some surveyed RateCity users have refinanced up to three times.

However, if you refinance several times in short succession, it could affect your credit score. Lenders assess your credit score when you apply for new loans, so if you end up with bad credit, you may not be able to refinance if and when you really need to.

Before refinancing multiple times, consider getting a copy of your credit report and ensure your credit history is in good shape for future refinances.

I have a poor credit rating. Am I still able to get a mortgage?

Some lenders still allow you to apply for a home loan if you have impaired credit. However, you may pay a slightly higher interest rate and/or higher fees. This is to help offset the higher risk that you may default on your repayments.

I can't pick a loan. Should I apply to multiple lenders?

Applying for home loans with multiple lenders at once can affect your credit history, as multiple loan applications in short succession can make you look like a risky borrower. Comparing home loans from different lenders, assessing their features and benefits, and making one application to a preferred lender may help to improve your chances of success

Will I be paying two mortgages at once when I refinance?

No, given the way the loan and title transfer works, you will not have to pay two mortgages at the one time. You will make your last monthly repayment on loan number one and then the following month you will start paying off loan number two.

If I don't like my new lender after I refinance, can I go back to my previous lender?

If you wish to return to your previous lender after refinancing, you will have to go through the refinancing process again and pay a second set of discharge and upfront fees. 

Therefore, before you refinance, it’s important to weigh up the new prospective lender against your current lender in a number of areas, including fees, flexibility, customer service and interest rate.

Can I refinance if I have other products bundled with my home loan?

If your home loan was part of a package deal that included access to credit cards, transaction accounts or term deposits from the same lender, switching all of these over to a new lender can seem daunting. However, some lenders offer to manage part of this process for you as an incentive to refinance with them – contact your lender to learn more about what they offer.

How do I know if I have to pay LMI?

Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.

If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.

How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.

How much of the RBA rate cut do lenders pass on to borrowers?

When the Reserve Bank of Australia cuts its official cash rate, there is no guarantee lenders will then pass that cut on to lenders by way of lower interest rates. 

Sometimes lenders pass on the cut in full, sometimes they partially pass on the cut, sometimes they don’t at all. When they don’t, they often defend the decision by saying they need to balance the needs of their shareholders with the needs of their borrowers. 

As the attached graph shows, more recent cuts have seen less lenders passing on the full RBA interest rate cut; the average lender was more likely to pass on about two-thirds of the 25 basis points cut to its borrowers.  image002