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Property spruiker's courses ruled an expensive waste of time'

Property spruiker's courses ruled an expensive waste of time'

Australia’s consumer watchdog has scored a legal victory against a property spruiker who made false claims about real estate investment.

The Federal Court has found that We Buy Houses and its sole director, Rick Otton, “made false or misleading representations in promoting a number of wealth creation strategies involving real estate”, according to the ACCC, which initiated the legal action.

The court found that We Buy Houses did not have a reasonable basis for representing that, by following its strategies, consumers could:

  • Buy a house for $1, without needing a deposit, bank loan or real estate experience, or using little or none of their own money
  • Create passive income streams through property and quit their jobs
  • Build a property portfolio without their own money invested, new bank loans or any real estate experience
  • Start making profits immediately and create or generate wealth

False claims, false testimonials

We Buy Houses failed to sufficiently inform consumers that its strategies could only realistically be successfully implemented by a consumer who already owned real estate, or who was able to finance a bank loan, according to the ACCC.

“The court also found that Mr Otton had made false or misleading representations that he had successfully implemented the wealth creation strategies he taught,” it said.

“In addition, a book authored by Mr Otton, and websites operated by We Buy Houses and Mr Otton, included testimonials from ‘students’ claiming they were able to buy a house for $1 which the court found were false or misleading.”

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We Buy Houses raked in millions of dollars

ACCC deputy chair Delia Rickard said We Buy Houses “sold a lie to vulnerable consumers” that home ownership could be achieved easily through strategies taught by Mr Otton.

“Around 2,000 consumers spent around $3,000 per ticket to attend Mr Otton’s boot camps, and approximately 700 consumers participated in the mentoring program at a cost of up to $26,000,” she said.

“Consumers who attended We Buy Houses seminars, boot camps and mentoring should be aware that, in her judgment, Justice Gleeson stated that for ordinary consumers seeking to achieve the outcomes represented by We Buy Houses and Mr Otton, the free seminars were a waste of time, and that the boot camps and the mentoring programs were an expensive waste of time.”

Justice Gleeson described Mr Otton as “a very unreliable witness who was prepared to maintain or defend statements that were obviously untrue or misleading”.

ACCC preparing further legal action

The ACCC instituted proceedings against We Buy Houses and Mr Otton in March 2015 following a coordinated investigation with NSW Fair Trading.

The ACCC alleged breaches of the Australian Consumer Law and the Australian Securities and Investments Commission Act 2001. The Federal Court concluded that the conduct was within the ambit of the ACL, not the ASIC Act.

The ACCC will now prepare the matter for a hearing seeking relief against both We Buy Houses and Mr Otton, including penalties, and a disqualification order against Mr Otton.

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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.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

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 does pre-approval' mean?

Pre-approval for a home loan is an agreement between you and your lender that, subject to certain conditions, you will be able to borrow a set amount when you find the property you want to buy. This approach is useful if you are in the early stages of surveying the property market and need to know how much money you can spend to help guide your search.

It is also useful when you are heading into an auction and want to be able to bid with confidence. Once you have found the property you want to buy you will need to receive formal approval from your bank.

What is Real Time Ratings?

Real Time RatingsTM ranks home loans according to cost and flexibility. This allows you to compare products using a simple score out of five.

Our world-first system analyses almost 4,000 mortgages based on your individual requirements. Best of all, the results are generated in real time, so if a lender has just hiked its interest rates or introduced extra fees, our system has factored this in.

What is a draw down?

The transfer of money from a lending institution to a borrower. In a typical home loan, the funds are drawn down all at once in order to buy the property. In a construction loan, the money is drawn down in several stages to pay the builders as they progress through each phase of the project. In a line of credit loan, you can draw down money up to a limit based on your loan’s available equity.

What is bridging finance?

A loan of shorter duration taken to buy a new property before a borrower sells an existing property, usually taken to cover the financial gap that occurs while buying a new property without first selling an older one.

Usually, these loans have higher interest rates and a shorter repayment duration.

How will Real Time Ratings help me find a new home loan?

The home loan market is complex. With almost 4,000 different loans on offer, it’s becoming increasingly difficult to work out which loans work for you.

That’s where Real Time RatingsTM can help. Our system automatically filters out loans that don’t fit your requirements and ranks the remaining loans based on your individual loan requirements and preferences.

Best of all, the ratings are calculated in real time so you know you’re getting the most current information.

Why was Real Time Ratings developed?

Real Time RatingsTM was developed to save people time and money. A home loan is one of the biggest financial decisions you will ever make – and one of the most complicated. Real Time RatingsTM is designed to help you find the right loan. Until now, there has been no place borrowers can benchmark the latest rates and offers when they hit the market. Rates change all the time now and new offers hit the market almost daily, we saw the need for a way to compare these new deals against the rest of the market and make a more informed decision.

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.

How does Real Time Ratings work?

Real Time RatingsTM looks at your individual home loan requirements and uses this information to rank every applicable home loan in our database out of five.

This score is based on two main factors – cost and flexibility.

Cost is calculated by looking at the interest rates and fees over the first five years of the loan.

Flexibility is based on whether a loan offers features such as an offset account, redraw facility and extra repayments.

Real Time RatingsTM also includes the following assumptions:

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  • Loans are assumed to be principal and interest
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How do I apply for a home loan pre-approval from Commonwealth Bank?

To apply for a Commbank home loan pre-approval, you can either call the bank at 13 2224 or meet one of the bank’s lending specialists. You can set up a meeting online if you wish. You’ll need to do some homework before contacting the bank, such as gathering information on the kind of properties you’d like to buy and their prices.

Preparing a financial summary, which lists all your income sources as well as significant expenses, can also help determine how much you can afford to borrow. You may also want to check your credit score before applying for pre-approval.

It’s worth remembering that a CBA home loan pre-approval doesn’t guarantee that you’ll get the loan. Once you get the pre-approval, you’ll have about three to six months to decide on a property and apply for the home loan. The bank will then confirm that the property is suitable for the loan before fully approving it.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.