Saturday, November 12, 2005

Australian Interest Rate Rises to Force Home Prices Down Further

Slide in Australian Property Values to continue

Following recent warnings by the Governer of the Reserve Bank of New Zealand to consumers warning of further interest rate rises if spending is not reined in, it is worth noting the comments of finance managers in Australia.

Standard and Poors credit rating agency recently reported that 10% of mortgages in Australia are in arrears, including nearly 5% that are more than 90 days in arrears. It is only to be expected that if interest rates increase this figure will worsen.

John Symond of Aussie Home Loans was reported as saying that even a 1% rise in home loan rates could have a devastating impact on borrowers and he advised borrowers to be cautious and not overcommit. He predicted that South Australian property values would fall in the next 12 months by 10% and that values would continue to fall for a further 3 years.

Home owners under stress because of rising interest rates could flood the market and force house prices to drop drastically if (when) rates rise in the next 18 months.

Australian household debt stands at $605 billion so Australians would do well to heed the warning from New Zealand's Reserve Bank Governer. While industry leaders are starting to speak out in Australia, our Reserve Bank has not issued any strong warnings. Borrowers may have become complacent due to the temporary plateau in rates but many experts are predicting rates to rise again in 2006.

Borrowers who are going to be under pressure when interest rates rise another 1% would be well advised to take preventative action now, rather than waiting and being forced to sell in a declining market.

Friday, November 11, 2005

Loan Checking Program for PC

Mortgage Checker - PC based software

Did you know ......

54% of monthly bank statements contain errors!

Never accept the repayments specified by your lender as being correct. In November 2005 the National Australia Bank admitted it had been overcharging 50,000 customers for about 13 years and that it was going to hand back $21.6 million dollars. In this instance the overcharging mistake largely affected business customers with fixed interest rate loans.

The banks do not want you to use this software because of the refunds they have had to make to users. If you have an existing mortgage then it will pay you to buy this particular mortgage calculator instead of using the free bank calculators. Not only can you do "what if" scenario's but you can check whether the bank has been ripping you off with your existing mortgage and get a refund. More on the super Mortgage Calculator and Checker here...

The software has been seen on...
- A Current Affair
- Money
- 7:30 Report
- 4 Corners
- Today Tonight

and there are over 300,000 copies in use.

The Home Deluxe Bundle consists of the following programs:
1. The Home Loan Checker (checks the interest calculations on your home loan/mortgage, including line of credit loans)
2. The Investment Forecaster (shows the additional interest you may earn over a period of time at a certain rate of interest or at various rates of interest).
3. The Mistake Compounder (calculates what a bank error at some time in the past is actually worth now)
4. The Home Loan Forecaster (allows you to determine what your repayments would be at different interest rates, payment modes and loan amounts)
5. The Offset Account Checker (calculates the interest on your savings account that should be offset against your mortgage account)
6. The Effective Rate Converter (shows the "true rate" that your lender is charging

Thursday, November 10, 2005

Interest Rates in Australia and New Zealand

Interest Rate Advice for Australian Borrowers

While the following information relates to the recent interest rate rise in New Zealand, there is not much difference in the financial systems in N.Z. and Australia. The comments of the Governer of the RBNZ are just as relevant to Australia as they are to N.Z.

In late October the Reserve Bank of New Zealand increased the Official Cash Rate (OCR) by 25 basis points to 7.00 per cent.

In his accompanying speech Reserve Bank Governor Alan Bollard said: "As noted in our September Monetary Policy Statement, medium term inflation risks remain strong. Persistently buoyant housing activity and related consumption, higher oil prices and the risk of flow-through into inflation expectations, and a more expansionary fiscal policy are all of concern. While there has been a noticeable slowing in economic activity, and a particular weakening in the export sector, we have seen ongoing momentum in domestic demand and persistently tight capacity constraints. Hence, we remain concerned that inflation pressures are not abating sufficiently to achieve our medium term target, prompting us to raise the OCR today.

"The most serious risk to medium term inflation is the continuing strength of household spending, supported by a relentless housing market and rapid growth in mortgage lending. Significant dis-saving by the household sector is showing through in a worsening current account deficit, now 8 per cent of GDP. Borrowers and lenders alike need to recognise that the current rate of debt accumulation is unsustainable. The correction of these imbalances and associated inflation pressures will require a slowdown in housing, credit growth and domestic spending. We also expect a significantly lower exchange rate. The longer these adjustments in behaviour and asset prices are deferred, the more disruptive they are likely to be.

"Today's increase in the OCR, combined with higher world interest rates and pipeline effects from the repricing of fixed rate mortgages, are expected to slow the housing market and household spending over the coming months. However, the prospect of further tightening may only be ruled out once a noticeable moderation in housing and consumer spending is observed. Certainly, we see no prospect of an easing in the foreseeable future if inflation is to be kept within the 1 per cent to 3 per cent target range on average over the medium term."

New Zealand's cash rate of 7% compares with official rates of 5.5% in Australia, 3.75% in the United States and 2.0% in the euro zone.

Annual inflation in New Zealand rose to a five-year high of 3.4% in the third quarter, boosted by higher oil and housing prices. It was the first time the rate has breached the RBNZ's 1-3 percent target band in four years.

Bollard said banks and other lenders, who have fuelled domestic spending through lending, needed to focus on their "long-term interests", which would not be achieved "if they promote loans to people who cannot afford them".

N.Z. House prices, which rose around 14 percent in the last year were at unsustainably high levels, and comments made by the property industry that activity would continue at such levels were "self serving and unhelpful".

The government also had a responsibility to reduce fiscal pressures, Bollard said.

Tuesday, May 10, 2005

Mortgage Checking Software | Australia

Australian Mortgage Checking Software

You can check out a proposed loan or mortgage using the Australian Loan Calculator facilities on our web-site.

However if you have an existing loan or mortgage and you would like to find out if the Banks have been overcharging you, then you need a different type of calculator. The loan checking software shown below can evaluate existing or proposed loans. Where it really comes into its own though is discovering if the Banks have been overcharging on existing loans. Did you know that most errors are in the Banks favour?

The banks do not want you to use mortgage checking software because of the refunds they have had to make to users. If you have an existing mortgage then it will pay you to buy this particular mortgage calculator instead of using the free bank calculators. Not only can you do "what if" scenario's but you can check whether the bank has been ripping you off with your existing mortgage and get a refund. More on the super Mortgage Calculator here...

The software has been seen on...
A Current Affair
Money
7:30 Report
4 Corners
Today Tonight
and there are over 300,000 copies in use.

The Home Deluxe Bundle consists of the following programs:

The Home Loan Checker (checks the interest calculations on your home loan/mortgage, including line of credit loans)
The Investment Forecaster (shows the additional interest you may earn over a period of time at a certain rate of interest or at various rates of interest).
The Mistake Compounder (calculates what a bank error at some time in the past is actually worth now)
The Home Loan Forecaster (allows you to determine what your repayments would be at different interest rates, payment modes and loan amounts)
The Offset Account Checker (calculates the interest on your savings account that should be offset against your mortgage account)
The Effective Rate Converter (shows the "true rate" that your lender is charging)


MORTGAGE CHECKER SOFTWARE

Monday, April 25, 2005

Australian Mortgage Terminology

Mortgage Terminology

If you have started looking into home loans you have probably noticed a lot of confusing terms such as loan valuation ratio. The following is a list of important mortgage and financial related terms which will give you a better understanding of issues relating to the mortgage process.

Accrued Interest – Interest calculated but not yet added.

Adjustable Rate Mortgage (ARM) – An adjustable (variable) rate mortgage loan has interest rates that are adjusted periodically based on changes in a selected index. As a result, your monthly payment may increase or decrease as result of changes in the overall interest rates.

Arrears – This refers to an amount that is overdue on a loan.

Assets - Property owned by the applicant.

Closing Costs - closing costs or fees that are charged for services are performed in the process of closing the loan application. Examples of closing costs include title fees, recording fees, application fees, credit report fees, solicitors's fees, taxes and surveying fees.

Credit Bureau – or otherwise known as the Credit Reference Association of Australia. Lenders can obtain credit information on applicants.

Equity – The amount of an asset which is actually owned. If a home is worth is $250,000 and the loan value is for $100,000 then the equity amount is $150,000.

Guarantee – a form of security in which another party promises to repay a loan if the borrow fails to repay.

Home Appraisal - a written analysis of the estimated value of your home.

Liabilities – this term refers to a person’s debts.

Lien – the right to hold property

Line of Credit – a loan with a specified ceiling, somewhat like a credit card.

Loan Maintenance Fee – a loan management fee charged over the life of a loan.

Loan Valuation Ratio (LVR)– the ratio of the amount lent to the valuation of the security. This is the ratio of the loan amount to the property valuation expressed as a percentage. An example would be a loan of $150,000 on a home valued at $160,000. The LVR is $150,000 times 100 and divided by $160,000 which is 93.75%.

Mortgagee – the lender of the funds.

Mortgagor – The person borrowing the money.

Principal – the capital sum borrowed on which interest is paid.

Principal and Interest – A loan where both the principal and interest are repaid together over the life of the loan.

Redraw Facility – a loan facility where you can make additional payments on a loan with the option of accessing this money if it is needed in the future.

Title - a document that gives evidence of ownership of the property. It also indicates the rights of ownership of the property.

Valuation - a report which gives professionals opinion on the value of the property. The valuation can be more or less than the purchase price.


Australian Mortgage Terminology

Wednesday, April 20, 2005

Reasons for Refinancing in Australia

5 Reasons why you might need to Refinance your Mortgage

There are many reasons why homeowners decide to refinance their homes and there are many ways they can benefit from refinancing existing mortgages. Because there are often misunderstandings about refinancing, it is important to first explain that refinancing is actually closing out a mortgage and financing your home with a new loan. With this being said, keep in mind that refinancing a home can be a lot of work and could also involve the same cost as when you first took out your mortgage. On the other hand, refinancing can result in significant savings depending on the circumstances and reasons involved. Your decision to refinance or not will ultimately depend on your particular circumstances.

The following are some of the most common reasons why people choose to refinance their homes.

1. Lower Payments. When interest rates fall below your current mortgage interest rates you may want to consider refinancing to lower your payments. Although there are costs involved, if you plan to stay in the home for a long time then the reduced monthly payments will likely offset the costs associated with the refinancing.

2. Reducing the Term of your Loan. Some people decide to refinance their home at a shorter term in order to reduce the overall costs of the loan. For example, if their current loan is for 30 years at a fixed rate of 8.00% and they refinance for 15 years at a 7.00% interest rate the savings could be thousands of dollars over the life of the loan even though the monthly payment amount may not change that much.

3. Converting Equity into Cash. Another reason why some decide to refinance their homes is to convert equity into cash. This cash is often used to do home improvements which will increase the value of the home.

4. To Consolidate debt. A common reason for refinancing is to finance a higher loan balance and use the cash difference to pay off credit cards, auto loans, and other debts.

5. To Convert an Adjustable Rate Mortgage to a Fixed Rate mortgage. When interest rates are low, it might be a good time to convert an adjustable rate mortgage to a more stable fixed rate loan which will likely save the borrower money over time.

Deciding on whether to refinance your current mortgage will depend on many factors including the current interest rates, your reasons for refinancing, how long you plan to stay in the home, your current loan features, and your goals for mortgage refinancing.

Try the Refinancing Calculator

Monday, April 18, 2005

Tips on Paying Off Your Loan Faster

Loan Reduction Strategies

By accelerating paying off your mortgage you can save thousands of dollars over the life of the loan. There are no secret or hidden methods to paying off your loan sooner as some would have you believe. It doesn't matter how it is engineered, it is only by making higher payments than required that the principal is paid down sooner, saving on interest and reducing the term of the loan.

1. If possible pay a little extra than the minimum repayment amount each month. For example, if you pay an extra $10.00 per week on a $200,000 30 year loan you will save $28,000 in interest and shave off approximately three years off your loan.

2. Use windfalls of money such as tax returns, lottery winnings, and bonuses to make extra lump sum payments to your loan principal. Make sure you can do this without penalty. This should be done whenever possible and as soon as possible to reduce the effects of compounding interest on your loan. If your loan has a redraw feature then you will have the benefit of being able to access any extra payments when you need money unexpectedly.

3. Even if interest rates go down, continue making payments at the original rate.

4. One of the most effective things you can do is to make more frequent repayments. If you make fortnightly or weekly repayments. You will actually be making an extra payment each year which will save you money by reducing the principal and the term of your loan.

5. If possible have your income deposited directly into your home loan and then use a credit card to pay your daily expenses. This can be a valuable way to use your existing financial resources to lower the cost of your loan. The reason for this is because it allows you to keep all of your money on your loan for a longer period of time where your money can then work to reduce both the term of the loan as well as the interest.

6. It's a good idea to make your first loan payment immediately upon settling your loan. This way you are instantly getting ahead of the game.

7. You can also use what is called an offset account to reduce the term of your home loan. An offset account is like a savings account that offsets any money in it against the balance of your home loan. And this is done before interest is calculated. This therefore, reduces the interest you pay and the term of your loan.

8. Use a home loan calculator (we have one on our web-site) to investigate different repayment scenario's and assess the possible savings.

If you can take advantage of any of the above strategies and you make a consistent effort to pay extra against your loan you will reduce the term of your loan and be paying more against the principal and therefore you will eventually save thousands of dollars on your home. The longer it takes you to pay off the principal of your loan the more interest you will pay.

Click here for more information...