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PO Box 741
Rozelle NSW 2039
Tel: 1300 885 559
Mob: 0405 534 344
Fax: 1300 885 559
Email: info@sydneymortgagepractice.com.au
Web: www.sydneymortgagepractice.com.au
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Hello,
While many of us dream of lying by a pool in the warmer months the reality throughout the year can be a lot of work. Our first article discusses that some home owners even decide to remove their pools.
Water saving devices and efforts are increasingly needed. Our article on water saving reveals there are additional reasons to consider what you can do as a home owner or property investor.
Remember we are here to help you. Please pass on this newsletter to any friends or family members. We are very grateful for the number of referrals we receive from existing clients.
We hope you enjoy our latest newsletter and look forward to hearing from you.
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| CANCELLED Kinross |
| Director |
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1. In the Swim
2. Comparing apples with apples
3. Water, Water Everywhere?
4. Share Market on a high!
| Thinking of filling in the pool? Previously the demolishers came in when a pool had structural or other problems that were going to be too expensive to fix. However, pool demolishers are increasingly brought in to get rid of perfectly functioning swimming pools... Why? |
Having a swimming pool may affect the property's sales potential by ruling out some groups of buyers. Older buyers may not want the maintenance work and those with very young children may think it a safety hazard. Buyers with most potential are probably people with teenage children or those who simply want to be able to swim at home. Houses in very expensive areas may not attract those buyers anyway.
There may also be potential environmental factors. Pools lose water through evaporation needing expensive pool blankets and the like. The pumps and filtration systems use increasingly costly energy to run them producing lots of greenhouse gas to generate that power. Environmentally sensitive purchasers looking at your home may not want that hole in the ground filled with water any more either.
The cost of getting rid of a pool is approximately $5,000 to $10,000 depending on Council requirements, site access and the size of the pool. On the other hand you may get some of that cost back by selling the pool filtration equipment.
| Comparing apples with apples |
| How do you compare apples with apples when assessing the interest rates advertised by lenders? |
If it were a level playing field, all you would have to do would be to take the interest rate of one, compare it with another and that would be that. But it's not a level playing field! An interest rate may appear low but the existence of a front end charge, or other monthly fees and charges must be taken into account when calculating how much this loan is going to cost you in all forms of payment ie total fees and charges as well as interest.
Some years ago the concept of the comparison rate was legislated to enable you to do this. The comparison rate grosses up all the additional fees and costs (that are definitely payable under the Contract with the lender) and amortises these across the life of the loan as if they were to be paid monthly instead of as a lump sum. This gives the comparison rate.
For example, and without citing the lenders involved, recently published information for a standard variable loan of $250,000 indicated one lender's initial interest rate as being 7.24%. Another lender was quoted at 7.42%. Which is the best loan?
The answer may seem obvious but it is deceptive. When the $770 establishment fee for the loan with the lower rate is taken into account, it lifts the comparison rate to 7.42%. The loan with the apparently higher initial rate has no establishment fee and its comparison rate is the same as its initial rate - 7.42%. The effective interest rate under both products is actually the same.
In recent years the concept of the comparison rate has come under opposition from certain parts of the finance industry. The opponents of the comparison rate argue that it is complicated and hard to understand. They also point out that there are shortcomings in the way it is calculated - for example, if the loan contains Mortgage Insurance the cost of this benefit is not included in the formula. The premium for Mortgage Insurance can differ significantly between loans and this is definitely a component of the overall cost. In the same way any exit penalty fees for early discharge are not included in the comparison rate.
Properly explained and understood, the continued use of the comparison rate in the mortgage industry is a feature which can help empower you, the consumer. Please call me if you require further information about how to use the comparison rate.
| The Melbourne Institute Household Survey is out and it makes for scary reading. Apparently we're saving less and less. |
The telephone survey of 1,200 households found that there has been an overall fall in the number of households saving from 54% to 52% and at the same time more families than ever are running into debt.
According to the survey the Western Australians are the best savers while those in New South Wales are stated to be by far the worst.
Most of us apparently save for holidays and travel, followed by that rainy day, retirement, bills, and finally renovating the family home.
| In many parts of Australia today people have their eyes fixed squarely on their dams. We've never been this concerned about water, or more correctly the general lack of it. |
Given the worst drought most Australians alive today have ever experienced and the harsh water restrictions that have resulted, it's about time we all became more water wise.
Governments at state and local level all seem to be pushing the idea that we have to make our houses more water efficient for the benefit of our communities and for our long term survival generally. There's no doubt they are all absolutely right.
Fitting water tanks, drilling bores, installing efficient shower heads and taps, and fixing leaks and leaky taps inside and outside are all things that all of us can do and depending on where you live in Australia there may be government subsidies and incentives to do just that.
Now the future survival argument is about as strong an argument as you can get, but you know, there's another reason to do all of this. That reason is financial; it's to do with the saleability and the re-sale value of your property. In any tight real estate market it pays to make the most of any advantage you have.
Green grass and healthy flowering gardens attract buyers compared to gardens that are definitely dead or dying. So, tank or bore water to keep the garden green and growing through even the tightest water restrictions also makes good financial sense.
Environmentally aware prospective buyers are actively looking for these features. Even if they are buyers who don't care about the water problem, when they see a home that's water wise they know that's one less thing they have to do with their precious leisure time and money. A water-wise home compared to a similar not water-wise property on offer might affect a purchaser's desire to buy one home over another.
Even if you're not selling at present the cost of water conservation measures now may have a positive affect on property values into the future.
If it's an investment home or unit, there might be another advantage. Check with your accountant but it may well be that any money spent on these water conservation measures is, at some point, tax deductible as well.
| The age of cheap energy is over. Energy-saving measures in the home will, therefore, become ever more cost-effective. |
This non-technical book covers the efficient consumption of energy in the home including: the position of the dwelling, its method of construction and the materials used; energy rating and the legal framework; insulation and U-values; windows and doors; conservatories, sunrooms and loft conversions; heating and hot-water systems; lighting and making the best use of daylight; ventilation; renewable energy technologies; appliances, gadgets and housekeeping; and the wider environmental issues including water economy and recycling.
Energy Efficient Home by Patrick Waterfield. Publisher: The Crowood Press Ltd
| The Australian love affair with shares seems to be growing as fast as the Australian share market. |
Estimates vary, but if you include the fact that we own shares because most have money tied up in superannuation that is invested in shares, then around 65% of the population hold shares directly or indirectly. Share ownership has also happened in recent years when organisations like the AMP demutualised and handed shares over to their former members.
One of the easiest ways to see how important the share market has become to ordinary people is the way share market information now invades every day life. It's impossible to watch a news broadcast without being told what shares did that day, broadcast live from some share broker's office. At the very least, two or three minutes of news time is given over to the share market each day.
So what's important information for the average share market investor?
Investing in shares should be a long term process for most of us who can't spend the day in front of a computer screen buying and selling shares. Indeed most of us would never have the time or expertise to do so anyway.
To illustrate a long-term investment approach to shares, let's say you bought $10,000 worth of quality shares at the end of April 2002 when the All Ordinaries Index was 3,300 points. If you did nothing but left those shares in the bottom draw until April 2007 when the All Ordinaries index stood at 6,100 points they would be worth approximately $18,500.00. That's a capital growth of $8,500 in 5 years or an average rate of return of 17% per year. Most of these shares would have paid a dividend or two along the way as well.
Will the share market always rise? Or will your shares always follow the index? Clearly history says a loud NO! History also says that when the share market has come crashing down it then goes back up again usually regaining any losses made and going even higher again, hence the long-term approach rather than short-term speculation.
As with all investments, you should take financial and tax advice before purchasing shares and / or financing the purchase of shares with a loan.
| Mortgage & Finance Association of Australia |
Sydney Mortgage Practice is a member of the MFAA, the peak governing industry body. All members are bound by a strict code of ethics to ensure the highest levels of service, integrity and professionalism.
John Kinross is an Accredited Mortgage Consultant of the MFAA. This means that he has proven qualifications, experience and expertise in the mortgage industry.
MFAA number is 10977.
Sydney Mortgage Practice has developed relationships with over 30 lending institutions in Australia. Our experience in liaising and negotiating with these wide range of lenders makes the process of securing property finance easy for you. The broad range of lenders on our panel enables us to satisfy (just about) all mortgage scenarios we encounter.
Sydney Mortgage Practice manages the whole process of obtaining funding from a lender on your behalf - from application through to the settlement of your loan.
We are committed to sourcing the most competitive loan from our panel lenders to suit each client's circumstances.
We aim to achieve the highest levels of customer satisfaction and to build long term relationships with our clients.
Disclaimer: This newsletter is intended to provide general news and information only. Readers should rely on their own enquiries before making any decisions regarding their own interests. Please do not rely on any part of this newsletter as a substitute for specific legal or financial advice. All material is copyright 2010.
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