Which property hot spots are sizzling in 2015?

Which property hot spots are sizzling in 2015?

Whether you take out a home loan as an owner-occupier or for investment purposes, you’re thinking about capital growth. When you end up selling your property down the line, you want to be sure you’ll get more than what you initially paid for it. 

This is why the real estate industry is saturated with talk of supposed “hot spots” — those areas that will become the next major magnets for home buyers. If you can spot these early, you might be able to get an affordable property that you can make a profit on in the future. 

So what are some of the nation’s property hot spots? The following are a few options you might wish to investigate.

Hot spots in Sydney

As far as many are concerned, Sydney is still the most important market to watch in New South Wales and the entire country – and for some, the only one. But of course, Sydney also comprises a large geographical area, so we need to be a little more specific than that.

Two areas that could be interesting options are Oran Park and Penrith, which were listed in NAB‘s Residential Property Survey for the final quarter of 2014 as two NSW suburbs tipped to see above average capital growth. Unlike, every other suburb on the list, these two areas have enjoyed a steady uptick in growth over time, while also having asking prices that were well under $1 million. According to data from SQM Research:

Oran Park has seen its asking price for houses hover around $600,000 since April 2009, but has experienced an 18.3 percent increase over the three years to March 10 2015, and an 8.5 percent rise over the 12 months prior to this date
Penrith, meanwhile, has seen its asking price steadily tick up from just under $400,000 in April 2009, to a little less than $600,000 by March 10 this year. This includes a 19.8 percent increase over the year to this date

It could be worth carrying out a home loan comparison for properties in these two areas if you’re wanting to capitalise on rising prices.

Eager buyers may also want to consider areas around Parramatta. Set to become Sydney’s second CBD, the city is tipped to grow in size and importance over the following years, with a number of infrastructure initiatives coming its way, including a light rail project worth $1 billion. According to the RP Data 2014 Best of the Best report, Mays Hill — right next to Parramatta – saw the largest 12-month gain in prices in the country, and its median price is now at a (comparatively) moderate $700,000 according to SQM.

Melbourne and the rest

Of course, it would be a mistake to think it’s the Sydney show when it comes to potential hot spots. Along with the Harbour City, Melbourne has also been giving the Reserve Bank of Australia headaches, having experienced some significant home value growth of its own – 8 percent on the last year, according to RP Data.

A potential Melbourne option to look into could be Ringwood. It was named as one of three Victorian suburbs to enjoy higher capital growth by NAB, but unlike the other two, it has seen its asking price rise relatively steadily since 2009 as shown by SQM Research data. As of March 10, the asking price for a house sits at just over $600,000. Not only that, but Ringwood East was named by RP Data and Aussie as one of the ten suburbs where houses sold for above asking price.

Meanwhile, the Gold and Sunshine Coasts are tipped by many to be an area to watch over the next year or so. The Valuer-General’s 2015 Property Market Movement Report states the two urban centres have seen their land valuations increase significantly, while again, NAB noted the Gold Coast was one of the areas to watch for capital growth in 2015. 

Not only is the Gold Coast a popular tourist and vacation area – including for foreign buyers – but it will also be the site of the 2018 Commonwealth Games, sure to drive prices up even further.

According to SQM Research, the Sunshine Coast has seen relatively moderate asking prices, at around $500,000. As for the Gold Coast, it depends on where you look, but prices generally range from just over $500,000 to around $700,000. Additionally, neither area has seen significant peaks and troughs over the last five years. Not only could properties there make a good investment, they also could be easy on the home loan calculator

If any of these potential hot spots has piqued your interest, start researching into these areas. There are a variety of professionals, experts and advisers who can help you with this task so you can be sure you’re making the right choice.

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Learn more about home loans

What is a line of credit?

A line of credit, also known as a home equity loan, is a type of mortgage that allows you to borrow money using the equity in your property.

Equity is the value of your property, less any outstanding debt against it. For example, if you have a $500,000 property and a $300,000 mortgage against the property, then you have $200,000 equity. This is the portion of the property that you actually own.

This type of loan is a flexible mortgage that allows you to draw on funds when you need them, similar to a credit card.

What is an investment loan?

An investment loan is a home loan that is taken out to purchase a property purely for investment purposes. This means that the purchaser will not be living in the property but will instead rent it out or simply retain it for purposes of capital growth.

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.

Can I change jobs while I am applying for a home loan?

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.

What are the responsibilities of a mortgage broker?

Mortgage brokers act as the go-between for borrowers looking for a home loan and the lenders offering the loan. They offer personalised advice to help borrowers choose the right home loan for their needs.

In Australia, mortgage brokers are required by law to carry an Australian Credit License (ACL) if they offer credit assistance services. Which is the legal term for guidance regarding the different kinds of credit offered by lenders, including home loan mortgages. They may not need this license if they are working for an aggregator, for instance, as a franchisee. In both these situations, they need to comply with the regulations laid down by the Australian Securities and Investments Commission (ASIC).

These regulations, which are stipulated by Australian legislation, require mortgage brokers to comply with what are called “responsible lending” and “best interest” obligations. Responsible lending obligations mean brokers have to suggest “suitable” home loans. This means loans that you can easily qualify for,  actually meet your needs, and don’t prove unnecessarily challenging for you.

Starting 1 January 2021, mortgage brokers must comply with best interest obligations in addition to responsible lending obligations. These require mortgage brokers to act in the best interest of their customers and also requires them to prioritise their customers’ interests over their own. For instance, a mortgage broker may not recommend a lender who gives them a commission if that lender’s home loan offer does not benefit that particular customer.

How to break up with your mortgage broker

If you find a mortgage broker giving you generic advice or trying to sell you a competitive offer from an unsuitable lender, you might be better off  breaking up with the mortgage broker and consulting someone else. Breaking up with a mortgage broker can be done over the phone, or via email. You can also raise a complaint, either with the broker’s aggregator or with the Australian Financial Complaints Authority as necessary.

As licensed industry professionals, mortgage brokers have the responsibility of giving you accurate advice so that you know what to expect when you apply for a home loan. You may have approached the mortgage broker, for instance, because you have questions about the terms of a home loan a lender offered you. 

You should remember that mortgage brokers are obliged by law to act in your best interests and as part of complying with The Australian Securities and Investments Commission’s (ASIC) regulations. If you feel you didn’t get the right advice from the mortgage broker, or that you lost money as a result of accepting the broker’s suggestions regarding a lender or home loan offer, you can file a complaint with the ASIC and seek compensation. 

When you first speak to a mortgage broker, consider asking them about their Lender Panel, which is the list of lenders they usually recommend and who may pay them a commission. This information can help you decide if the advice they give you has anything to do with the remuneration they may receive from one or more lenders.