Better Choice Mortgage Services - Quarterly Newsletter Summer 2015-16 - PC

Summer 2015 Newsletter
MORTGAGE
& FINANCE
- UPDATE -
WORRIES OVER OFF-THE-PLAN BUYING
Moves are being made to stop buyers
being burnt.
While the NSW government is taking
steps to stop people from being burnt
by off-the-plan developers, a high level
official from one of Australia’s major
banks has warned of other dangers
that off-the-plan buyers face.
Speaking at the HIA-
Cordell construction
outlook breakfast in
Sydney recently, Westpac
chief economist Bill
Evans said the APRA-led
clampdown on investor
lending was presenting
huge challenges for those
with off-the-plan purchase
agreements.
Evans believes APRA’s
mandate that investor
lending levels should not
grow by more than 10%
each year means that
many off-the-plan buyers
could be left high and dry when it comes
time to settle.
“The issues about pre-sales is [sic] a real
worry,” Evans said. “Someone commits to
a pre-sale and in two years they go to the
bank and say ‘Can I have my money now?’
and the bank has no obligation to give
them the money,” he said.
BANKS TO CHANGE
LVRS FROM
90 % TO
80 %
Huge challenges for
those with off-the-plan
purchase agreements.
Evans is not the first to air concerns about
the fixture of off-the-plan sales, with
Todd Hunter, founder
of mortgage brokers
and buyer’s agency
wHeregroup, expressing
a similar opinion recently.
“I think we’re going to
see a glut of people in
the near future for who it
will come time to settle
and they’re going to get
caught out,” Hunter said
at the time.
“With what the banks are
doing with changing LVRs
from around 90% to 80%
somebody who put down
a 10% deposit on a $1-million dollar unit
is going to have to come up with another
$100,000 when it comes to settlement
time,” he said.
Hunter also believes that there could be
more people caught out after they rushed
into agreements in the hope of cashing in
on the booming Sydney market.
“With the way Sydney’s prices have been
going, there’s definitely going to be a
cooling off over the next year or two, and if
that happens when it’s time to settle there
will be trouble,” he said.
“If that happens and the bank values the
property at less than the price you agreed
to buy it for, then they’ll only finance that
lower amount and you’ll be hit with making
up the shortfall.”
- 2015 AUSTRALIAN BROKER OCT ISSUE 12.20 -
WELCOME TO OUR
SUMMER EDITION
The past quarter has
certainly slowed with the
number of new loans
falling. We have seen
many clients obtaining
pre approvals, but are in
no rush to act, content
to sit back and watch the
market before they buy or
invest. People are “seeking a good deal”
as they say.
First home buyers have been encouraged;
many believing the market has allowed
them the opportunity to save more
without prices moving up. In addition,
the tighter lending guidelines imposed by
the banks has resulted in more stringent
criteria being imposed on borrowers.
In contrast the number of pricing requests
and reviews we have completed for
existing clients has tripled, reaping
significant savings on rates and charges.
Simply by providing small amounts of
information about their existing loans via
a telephone call or email, has resulted in
big saving on existing loan facilities.
There is a perceived lack of confidence
and caution that has not been seen in
Perth for many years. Job security and
the re alignment flowing through the oil
and gas and mining industry (with the
price of oil, gas and minerals falling), plus
accompanying job losses on projects and
adjustments in incomes of companies and
contractors servicing them has impacted
the community and business in WA.
The commercial property markets have
seen increased vacancies and landlords
accepting rent reductions to keep
premises occupied.
The major Lenders have increased their
standard variable rates across the board
in response to meeting higher capital
requirements imposed on them by APRA.
Many of the second tier lenders have
progressively followed, but leaving some
unchanged. There are a number of lender
promotions still on offer, which we would
be happy to advise our clients on.
As always we wish to thank all our clients
for their patronage. We encourage you
to be watchful of your spending habits
and endeavor to remain within budget
over Christmas and we wish you and your
families a happy, prosperous and safe
Christmas and New Year.
Kind regards
CONTACT US FOR FURTHER INFORMATION & GUIDANCE
Better Choice Mortgage Services Call 1300 805 221 Email
Suite 12, 10 Whipple Street Balcatta Western Australia 6021 Australian Credit Licence Number 384621
PAUL CHILLEM
FINANCE BROKER
0415 732 888

FACEBOOK FRIEND
COULD SCUTTLE
HOME LOANS
Social media giant Facebook was
recently granted a patent in the
United States for a system that
would allow lenders to use analysis
of an individual’s friend list in
determining whether they should
be granted a loan or not.
In the US, lenders use an
individual’s credit score,
a statistical analysis of
a person’s credit files, to
determine whether they
should be approved for a
loan such as a mortgage.
Included in Facebook’s patent
application was a hypothetical where
a lender could use the average credit
score of the individuals an applicant
is friends with on the platform to
determine whether to proceed with a
loan application.
“[The lender] examines the credit
ratings of members of the individual’s
social network who are connected
to the individual through authorised
notes,” the application read.
“If the average credit rating of these
members is at least a minimum credit
score, the lender continues to process
the loan application. Otherwise, the
loan application is rejected.”
According to Rebecca
Hona, mortgage broker
of buyers’ agency
wHeregroup, Australians
can relax though, as the
system’s use of credit scores means
it is unlikely to ever be rolled out here.
“Our system of credit reporting
is quite different to what happens
in America; in fact it it’s almost
the opposite, so I can’t see a
system like that happening here,”
Hona said.
- AUSTRALIAN BROKER -
A GIFT FROM
THE ATO
HOW AUSSIES WILL USE
THEIR TAX REFUND
21.0% HOLIDAY
19.2 %
22.7 %
20.8 %
21.7 %
RENOVATIONS
MORTGAGE REDUCTION
INVEST / SAVE
OTHER
HOW YOUR PET AFFECTS YOUR HOME SALE
COULD YOUR PET BE THE PROBLEM?
If you have a pet and are trying to sell your
home, take a look at these simple steps to
help with your sale.
Australia is one of the
most pet-loving countries
in the world, with six out
of 10 people owning a pet,
the Australian Veterinary
Association says.
Yet, look through most
property listings and there’s
one thing you’re unlikely to
see – pictures of animals.
This may be because not
everyone is a fan of pets,
which sees many marketers
avoid them in fear they
may turn off a buyer,
BresicWhitney head of marketing Brendan
Fearn said.
Pets can make a house a home
but if you’re not
careful they could also
turn off a home buyer.
However, this hasn’t stopped them from
being one of the few agencies introducing
pets into their listings photographs. And it
seems to be working.
“We find that having pictures of pets and
people really helps brings the images to life,”
Mr Fearn said.
“It’s less about showing the size and function
of the home, we’re really trying to bring to
life the emotion of a property so buyers
get a sense of what it’s like to live there. So
including pets in the images really helps us to
do that,” he said.
ANIMALS IN REAL ESTATE LISTING PHOTOS
But they haven’t quite got round to
staging a home around a pet – all of those
in the photographs are the owner’s
residential pets.
6/10
PEOPLE IN
AUSTRALIA
OWN A PET
HAVE YOU MADE AN APPOINTMENT WITH
YOUR BROKER YET TO SEE IF
YOU ARE GETTING THE BEST DEAL?
Call us on 9240 2001 or email
“We get to the property, we find sometimes
the pets might like to follow the photographer
around, so they bring out their personality
and become part of the shoot quite
spontaneously,” he said.
“Pets are a great way to
make a house feel like a
home.”
Despite this, not all
evidence of pets is welcome
during every part of the
selling process.
Mr Fearn said de-cluttering,
taking away litter trays and
removing evidence of pet
paraphernalia is often done
before the photographs
are taken, as they can
detract from the overall
presentation of the home.
Bresic Whitney sales agent Darren Pearce
agreed, noting that less is more when
presenting a home open.
“If they’ve got a beautiful bowl and a name
and it fits in [it can work]… but when it comes
to things like cat litter and a tray, we might
chat with the vendor about how these things
can be discreetly removed,” he said.
“Not everybody loves cats, fish, dogs, birds,”
he said. Allergies can be a source of dislike
for animals, particularly if they shed fur.
“Sometimes they’re not as friendly as you
think they are or they can be too friendly and
they can be a bit of a distraction,” Mr Pearce
warned. “If you’ve got little kids coming in to
an open house, a dog could bite somebody
or maybe bowl somebody over,” he said.
At the end of the day, keeping the pets in the
listings photographs and not the home itself
might be the best option for vendors hoping
to maximise their sales price. “People do
comment and ask where the dog they saw in
the listing is,” he said.
TOP FIVE TIPS FOR PET-OWNING VENDORS
1. Check for odours, particularly if your pet
has lived in the home for a long time.
2. Ensure pet areas, such as a dog’s kennel,
is clean and tidy
3. Check the outdoor areas for excrement
and clean where necessary
4. Don’t be concerned about cat or dog
flaps in the doors – they are often seen
as a positive by buyers.
5. If you are making a feature out of the
home’s pet friendliness, include a nice
place to hang pet leads and blankets
- DOMAIN.COM.AU -
Better Brokers. Better Solutions.
LIVING IN A TRENDY POSTCODE
CAN BE A NICE BONUS...
... however, it’s nowhere near the top
of the list of what home buyers want in
their suburb.
The thing that influences homebuyers
the most when it comes to buying in a
particular suburb is price.
New research by finder.com.au has
revealed it’s not about living in the trendy
suburbs that appeals most to buyers but
things like price, low crime rates and
peace and quiet.
In fact many potential buyers rated living
in an entertainment area fairly low on their
list of priorities.
Half of respondents were most concerned
about cost, 38 per cent put peace and
quiet at the top of their wishlist and about
a quarter wanted to make sure the crime
rate was low.
5
THINGS YOU SHOULD NEVER PUT ON CREDIT
A WEDDING The vow is not “until debt do
us part”, but well it could be if you card a
wedding. With the average spend on that
one day now a crazy $65,482, brides and
grooms can spend years paying it off – and
thousands in excess interest.
But whack a wedding on the average credit
card, as a recent moneysmart.gov.au survey
found 18% of people do, and with the same
$1522 monthly repayment you’d up the interest
an extra $19,489 – and push the total cost
above $110,000 (at the
average 19% interest rate,
this time over six years).
It’s all pretty scary when
you learn 35% of couples
blow their budget. Sure, a
wedding has sentimental
value but it has no
residual financial worth
– in other words, there’s
nothing you can sell
to recoup the cost and
swiping for it could put you far behind for a
house purchase.
UNI FEES I am all for investing in yourself, but
not if via the HECS-HELP lending scheme the
government will do it for you. OK, you qualify
for a 10% discount if you pay up front (for
now), but access the cash from a card and
remember you’ll pay an average 19% interest.
Meanwhile, HECS-HELP is, in effect,
interest free – your debt grows only at
the rate of inflation. Say you have a $10,000
tuition bill and use a card to cut it to $9000,
then pay the minimum each month – because
you’re a broke uni student. You’d fork out
double that amount, almost $18,000, by the
time you’d cleared your card nine years later.
Alternatively, your $10,000 HECS-HELP
debt would have grown to only about
$13,000. There’s an argument to access the
government loan scheme even if you have
the cash up front, and to invest the money
elsewhere – if you’re confident the return
would far outstrip inflation and compensate
for the loss of the discount.
YOUR MORTGAGE It’s foolish indeed to
use your credit card to pay your home loan.
This is doubling the debt damage. And
unless it’s a short-term cashflow problem,
it is a BIG danger sign.
Pet friendly suburbs were important to
about 11 per cent of respondents.
Perhaps not surprisingly living close to
an airport was the least important factor
when choosing where to live - although
one per cent did put it in their top three
wish list.
While many might like to visit local bars
and music venues, buyers weren’t too
keen on living close to them.
About a fifth of respondents wanted
to be close to family and friends
- PERTHNOW.COM.AU -
You need to sit down and have a realistic
look at your money in and out – are you
overcommitted (perhaps because your
circumstances have changed)?
It’s counter-intuitive, but if you are seriously
struggling to meet your mortgage repayment,
you need to talk to your lender. Explain
you are experiencing financial hardship, as
defined in the National Consumer Credit Code.
Sit down and have a
realistic look at your
money in and out
and question - are
you overcommitted?
They may grant you a short-term repayment
pause or issue you with
a revised repayment
schedule – after all, they’d
like to ultimately get
their money back. Just be
aware the longer you take
to get out of a mortgage,
the more interest your
lender will get out of you.
YOUR TAX BILL The Tax
Office always wants its
slice of your spoils, and it
speaks of poor planning
if you no longer have it – you’ve spent the
government’s money! Meeting your liabilities
is your first priority on the way to financial
security. It might be possible to arrange to
delay paying a tax bill, particularly if there’s
“hardship”, but you’ll usually cop more than
9% interest on the outstanding amount. And
yes, even though the cheapest credit card
charges only 7.99% interest, I still say don’t go
there: the ATO will give you a repayment plan
you’ll have to stick to.
HOLIDAYS Never succumb to a plastic triptastic
because afterwards you’ll have nothing
but selfies to show for it. Holidays are a credit
binge with a big financial hangover; you don’t
need me to run the numbers. Suffice to say a
vacation bought with cash costs what it costs.
Not a cent more.
Think of your debt decisions this way:
the more money you have to dedicate to
repaying previous splurges, the less there
is left for new ones. It is unsustainable
and unsafe.
Remember, save don’t cave. You may even
enjoy more the goals and rewards you
single-mindedly shoot for.
- WATODAY.COM.AU -
BASIC TRAINING
HOW TO PAY OFF
YOUR MORTGAGE
Thinking creatively helped Peter
Horsfield and wife Roz pay off the
mortgage on their Sydney home in
just seven years. The young couple
was keen to get the mortgage monkey
off their backs as soon as possible.
“Being under 30 and having a $600,000
mortgage and being newly married was
a fairly freaky kind of experience,” says
Horsfield, a financial planner.
So after a year, they rented out their
furnished three-bedroom apartment
to executive clients for $1200 a week.
Meanwhile they moved into a onebedroom
apartment in the same block,
paying about $450 a week in rent.
They also set strict
savings goals, invested
in study to improve their
salaries and ploughed any
bonuses or extra money
into the mortgage until it
disappeared.
Horsfield said the strategy worked so
well that they did it again with a second
property.
“It’s a wonderful feeling – it just opens
the door to other opportunities,”
says Horsfield.
Sharon Walker, a financial planner with
NAB, says there are plenty of easy
strategies you can use to pay off your
mortgage quick-sticks.
1. Complete a budget so you know
where your money is being spent,
says Walker.
2. Next, change any monthly
payments to fortnightly, a simple
move that could potentially save
you tens of thousands of dollars.
3. “The other thing I suggest is to
round up the repayment. For
example, if you’re paying $564 a
fortnight, increase that to $570
or $600 depending on your
affordability,” says Walker.
“Over time, even a little bit extra every
fortnight makes a huge difference.”
Walker suggests using a money
calculator to work out how much you’ll
be paying in interest over the life of
your loan.
“That can give you a little bit of a shock
and motivate action,” she says.
- SMH.COM.AU -
CONTACT US FOR FURTHER INFORMATION & GUIDANCE Call 1300 805 221 or Email
Mortgage & Finance Update - Summer 2015 Newsletter

APPLY NOW
INTEREST RATES
FROM
3.99 %
VARIABLE RATE
*CONDITIONS APPLY
COMPARISON RATE
4.12%
WARNING: This comparison rate is true only for
the examples given and may not include all fees
and charges. Different terms, fees or other loan
amounts might result in a different comparison.
TAX IMPLICATIONS OF OWNING A FOREIGN
INVESTMENT PROPERTY By David Shaw. 22/09/2015
Australian’s generally love investing
in property given its track record of
achieving good returns over the
long term. Many property investors
achieve diversification by purchasing
properties in different locations
around Australia.
The more intrepid and adventurous go
further afield and purchase
properties in other
countries such as New
Zealand, France, USA or
England. For keen investors
looking at diversifying their
property portfolio with
an overseas purchase,
there are a number of tax
matters that need to be
considered.
Under the Australian selfassessment
tax system,
Australian residents
for tax purposes are
required to include all
income earned from both
Australia and overseas in
their assessable income when submitting
their annual income tax return. Failing to
include foreign income is very risky and
not recommended. The Australian Taxation
Office (ATO) in the last few years has ramped
up its pursuit of Australian taxpayers who
own overseas investments but have not
disclosed income from this source in their
income tax returns. The ATO has good
working relationships with other country’s
tax authorities and data is shared under the
various agreements. Their reach is very long
so it is worthwhile and recommended to
comply with the tax law requirements.
When investing in an overseas property
there are a number of questions about
tax that need to be addressed including:
Where do I pay tax on a net rental
income? Do I get taxed in either country
or just Australia? Can a foreign net rental
loss be offset against other Australian
income? What are the tax implications
if I sell the property? Are there any tax
implications for my estate if I still own the
property at death? To answer some of
these questions, we are going to use an
example to illustrate how it works. Bob, an
Australian resident for tax purposes, owns
a two bedroom apartment in down town
Toulouse, in the south of France. Australia
and France have a Double Tax Agreement
(DTA) in place outlining the taxing rights on
the different types of income.
If Bob’s apartment makes a net rental
income for the year of €5,000 EUR, then
under the DTA, he is required to pay tax on
this income in France. As an Australian tax
resident he is also required to include this
income in his Australian income tax return.
To avoid double taxation, relief is granted
through the Foreign Income Tax Offset
(FITO). FITO acts to reduce the Australian
tax payable on rental
income which has
already been taxed in
another tax jurisdiction.
If Bob’s apartment makes
a net rental loss for the
year of €2,000 EUR,
then this loss can be
offset against his other
assessable income in
his Australian income
tax return effectively
meaning negative
gearing is achieved on
the investment.
If Bob’s apartment is sold
after 10 years and makes a
capital gain of €50,000 EUR, then this gain
would be taxed in France. In his Australian
tax return, the 50% of the gain would be
included due to the 50% discount and
double taxation relief would be available
under FITO.
If Bob holds the property until his death,
inheritance tax would be payable in France.
There is no inheritance tax in Australia,
having been abolished in 1979. His estate
or beneficiaries may be subject to tax on a
subsequent sale.
When the decision is made to purchase
an overseas investment property, find a
good lawyer, accountant and real estate
agent. These professionals will be an
asset in ensuring compliance with local
laws and regulations. Each country will
have different laws regarding property
ownership and good advisors can provide
exceptional guidance with regards to
complex tax issues.
- YOURINVESTMENTPROPERTYMAG.COM.AU -
WORLDWIDE CENTRAL BANK RATES
US
0 % -
0.25 % 11 %
0.05 %
RUSSIA
UK
EURO
7.25 %
INDIA
2.75 %
BRAZIL
AUSTRALIA
2 % NEW ZEALAND
SETTLEMENTS AND LEGAL WORK
MDH LEGAL are highly recommended solicitors, specialising in the following services:
• Settlements for the sale and purchase of residential
and commercial properties
• Settlements for the sale and purchase of businesses
• Strata titles
• Subdivision applications
• Related party transfers
• Deceased estates
• Powers of attorney
• Wills
• Debt recovery
Melissa Dixon provides a very personalized and cost effective service and will provide a
no obligation free quote for any of your settlement and legal requirements on request.
- AUSTRALIAN BROKER -
MDH Legal is located at Suite 3, 175 Main Street, Osborne Park Phone (08) 9344 1677
DISCLAIMER: Whilst we believe the information contained in this newsletter to be correct, we give no warranty to this effect and we expressly disclaim any liability for loss or
damage by any person acting upon information contained in this summary. All information contained herein is indicative as at 30/11/2015 and subject to change at anytime without
notice. Advanced Finance (Pty) Ltd t/a Better Choice Mortgage Services are not financial planners or accountants and we would encourage our clients to seek professional advice
before acting on any a financial or taxation information in the newsletter.