Property sales trending downwards

New home sales have continued to decline across most of Australia, according to the latest Housing Industry Association (HIA) Sales report. 

HIA have found that home sales volumes fell 3.7 per cent during July 2017 compared to June 2017. 

Sales for January to July 2017 are also lower than the previous year, having fallen 4.6 per cent.   

HIA’s Principal Economist Tim Reardon has drawn links between the drop in apartment sales and the continuing decline of new home sales nationally since they peaked in mid 2015. 

“July’s result was driven by a 15.7 per cent decline in multi-unit sales and a more measured reduction in detached house sales,” said Mr Reardon.  

July wielding lower results is consistent with the HIA’s expectation that activity will decline “modestly from these record high levels over a number of years,” said Mr Reardon. 

“Victoria was the notable exception – as the only state to grow sales during July 2017. Sales were up by 9.8 per cent on what is already a very high level of activity. 

“On the other hand, the Western Australian Government’s First Home Buyers grant ended on 30 June 2017 and as a consequence sales in July fell sharply from what was already a very low base,” said Mr Reardon.

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Source: HIA.com.au

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What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

What is a guarantor?

A guarantor is someone who provides a legally binding promise that they will pay off a mortgage if the principal borrower fails to do so.

Often, guarantors are parents in a solid financial position, while the principal borrower is a child in a weaker financial position who is struggling to enter the property market.

Lenders usually regard borrowers as less risky when they have a guarantor – and therefore may charge lower interest rates or even approve mortgages they would have otherwise rejected.

However, if the borrower falls behind on their repayments, the lender might chase the guarantor for payment. In some circumstances, the lender might even seize and sell the guarantor’s property to recoup their money.

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.

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A mortgage default occurs when you are 90 days or more behind on your mortgage repayments. Late repayments will often incur a late fee on top of the amount owed which will continue to gather interest along with the remaining principal amount.

If you do default on a mortgage repayment you should try and catch up in next month’s payment. If this isn’t possible, and missing payments is going to become a regular issue, you need to contact your lender as soon as possible to organise an alternative payment schedule and discuss further options.

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