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Could you be better off renting than buying in Perth?

Could you be better off renting than buying in Perth?

A new index for the Real Estate Institute of Western Australia (REIWA) has crunched the numbers around renting versus buying in Perth, and calculated the rate of annual value growth that would be required to make buying the more financially viable option.

Created in conjunction with Curtin University, the REIWA Curtin Buy-Rent Index is intended to help West Australians determine the best time to buy or rent, based on past and current trends in the economic climate.

According to the debut Index for the 2017 June quarter, median house prices would need to grow more than 4.3% per annum over the next 10 years, and surpass a value of $770,477, for the purchase of a house (‘buy’ decision) to be considered financially viable.

If house prices are expected to grow at a slower rate, then renting could be considered a preferable choice.

While past performance is not a guaranteed indicator of future performance, since June 2002, Perth’s annual growth rate has been 6.9%.

The index is based on a range of variable factors, including:

  • Median house price for the Perth metro region – $508,000
  • Median house rent for the Perth metro region – $360 per week
  • 10 year average mortgage rate – 6.69%
  • 10 year average Perth inflation rate – 2.29%

Figures for the September quarter Buy-Rent Index are set to be released late December 2017.

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Learn more about home loans

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.