How to identify a property hot spot

How to identify a property hot spot

Buying property does not automatically guarantee financial success. But make a sound purchase, choose a home loan wisely, and a buyer stands to gain tens of thousands of dollars, even in a slow property market.

Getting advice can be helpful, but be sure to take the advice from someone who has been successful. The truth about property can often be hard to find as most of the “advice” comes from people trying to sell you property.

But it’s pretty simple, says finance guru Paul Clitheroe.

“If you live somewhere where the population is growing and there is a shortage of land and housing, start thinking about buying a property,” he told Money magazine.

“If you can add employment, schools, health services, leisure facilities, a decent coffee and good public transport, then I think that with a long-term view you would be silly not to buy in that area.”

Location, location, location

There’s a lot to be said for buying the worst house in the best street, or a rundown house in a great suburb, according to real estate expert Andrew Winter, host of Foxtel’s Selling Houses Australia.

“It’s harder to overcapitalise and even the smallest renovation will add value,” he said.

Go for growth

Do your research, listen to the experts and find an area with a bright future.

“Good roads and public transport push prices sky high. But you’ll have to take a punt to make it big; there’s no use buying when construction has already started. You need to buy in the planning phase and hope that road or rail links actually get built,” said Winter.

Find an ugly duckling

But you must be prepared to do the renovation work yourself, he adds: “The price of a “renovator” is set according to how much it will cost for a professional to do the job so if you can do some or all of the work you’re bound to come out in front.”

Take advantage

It’s all about knowing a good deal when you see it and taking advantage.

“One person’s loss is another person’s gain. Look for vendors who need a quick sale like repossession, divorce or deals that have fallen through,” said Winter. “Keep your ear to the ground and be ready to grab a bargain.”

Limited supply

Buy a property with a restricted supply. An amazing view is always a good bet because we can’t make more beaches and rivers. The same rule applies for fine period architecture, said Melissa Opie, author of property guide, Find the Right Property, Buy at the Right Price.

“Buy properties in line with the dominant architectural style of their location. Period properties hold their value better than newer ones,” she writes.

It is more expensive to follow this rule, but it is low risk with stable long term growth, adds Winter. 

Choose finance options wisely for big gains

You could wait for the stars to align in your search for the perfect property. But one of the easiest ways to sweeten the profit margin long term is through your home loan, said Alex Parsons, chief executive of RateCity.

“With a few simple tips, you can reduce the amount of interest paid on your home loan by tens of thousands of dollars, if not more,” he said.

“The first is to simply borrow less. If you borrow 90 percent of the value of a $400,000 property you start with a mortgage of $360,000. Borrow 95 percent and that mortgage starts at $380,000,” he said. “That $20,000 difference at the outset of a 30-year loan term (at 6 percent interest) means an extra $43,000 in repayments.”

Next, consider the interest rate and fees on your home loan, he said. RateCity data shows that while the average standard variable interest rate is around 5.4 percent, variable rates range from 4.49 percent and fixed rates from 3.99 percent at the time of writing.

“Our calculations show that by switching a $300,000 home loan from the average rate to one of the lowest available in the market a borrower could free up more than $1800 in the first year and reduce the interest bill by close to $48,000 over 25 years.”

 

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Learn more about home loans

What happens to your mortgage when you die?

There is no hard and fast answer to what will happen to your mortgage when you die as it is largely dependent on what you have set out in your mortgage agreement, your will (if you have one), other assets you may have and if you have insurance. If you have co-signed the mortgage with another person that person will become responsible for the remaining debt when you die.

If the mortgage is in your name only the house will be sold by the bank to cover the remaining debt and your nominated air will receive the remaining sum if there is a difference. If there is a turn in the market and the sale of your house won’t cover the remaining debt the case may go to court and the difference may have to be covered by the sale of other assets.  

If you have a life insurance policy your family may be able to use some of the lump sum payment from this to pay down the remaining mortgage debt. Alternatively, your lender may provide some form of mortgage protection that could assist your family in making repayments following your passing.

Why is it important to get the most up-to-date information?

The mortgage market changes constantly. Every week, new products get launched and existing products get tweaked. Yet many ratings and awards systems rank products annually or biannually.

We update our product data as soon as possible when lenders make changes, so if a bank hikes its interest rates or changes its product, the system will quickly re-evaluate it.

Nobody wants to read a weather forecast that is six months old, and the same is true for home loan comparisons.

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

Why should you trust Real Time Ratings?

Real Time Ratings™ was conceived by a team of data experts who have been analysing trends and behaviour in the home loan market for more than a decade. It was designed purely to meet the evolving needs of home loan customers who wish to merge low cost with flexible features quickly. We believe it fills a glaring gap in the market by frequently re-rating loan products based on the changes lenders make daily.

Real Time Ratings™ is a new idea and will change over time to match the frequently-evolving demands of the market. Some things won’t change though – it will always rate all relevent products in our database and will not be influenced by advertising.

If you have any feedback about Real Time Ratings™, please get in touch.

Mortgage Calculator, Repayment Type

Will you pay off the amount you borrowed + interest or just the interest for a period?

How is the flexibility score calculated?

Points are awarded for different features. More important features get more points. The points are then added up and indexed into a score from 0 to 5.

What is a redraw fee?

Redraw fees are charged by your lender when you want to take money you have already paid into your mortgage back out. Typically, banks will only allow you to take money out of your loan if you have a redraw facility attached to your loan, and the money you are taking out is part of any additional repayments you’ve made. The average redraw fee is around $19 however there are plenty of lenders who include a number of fee-free redraws a year. Tip: Negative-gearers beware – any money redrawn is often treated as new borrowing for tax purposes, so there may be limits on how you can use it if you want to maximise your tax deduction.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Mortgage Calculator, Repayments

The money you pay back to your lender at regular intervals. 

Does Real Time Ratings' work for people who already have a home loan?

Yes. If you already have a mortgage you can use Real Time RatingsTM to compare your loan against the rest of the market. And if your rate changes, you can come back and check whether your loan is still competitive. If it isn’t, you’ll get the ammunition you need to negotiate a rate cut with your lender, or the resources to help you switch to a better lender.

How much information is required to get a rating?

You don’t need to input any information to see the default ratings. But the more you tell us, the more relevant the ratings will become to you. We take your personal privacy seriously. If you are concerned about inputting your information, please read our privacy policy.

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.

What is a valuation and valuation fee?

A valuation is an assessment of what your home is worth, calculated by a professional valuer. A valuation report is typically required whenever a property is bought, sold or refinanced. The valuation fee is paid to cover the cost of preparing a valuation report.

Mortgage Balance

The amount you currently owe your mortgage lender. If you are not sure, enter your best estimate.