first home buyers

Stamp Duty Cuts for First Home Buyers

by Chris Lang on April 25, 2011
Stamp Duty Cuts for First Home Buyers

I am always happy to give you some good news whenever I get a chance. So here goes – the amount of stamp duty first-home buyers pay in Victoria will be reduced by 20 per cent on July 1, 2011. This will be followed by further reductions of 10 per cent each financial year until […]

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Home DIY tips: how to fix a sliding door

by Chris Lang on February 2, 2011
Home DIY tips: how to fix a sliding door

Let me begin with another typical for a first home-buyer situation: you’ve bought an old house, moved in, and began discovering nasty surprises. Even though you’ve done the pre-settlement inspection, somehow there were things that escaped your attention. For example… this stuck sliding door that you couldn’t move an inch if your life depended on […]

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The sacrifices we make to own a house

by Chris Lang on December 13, 2010
The sacrifices we make to own a house

Flicking through the Australian Property Investor Blog, one article caught my attention. It was talking about the sacrifices that Australians are willing to make to own property. The discussion was based on results of Mortgage Choice 2010 Consumer Sentiment Survey. Since one of my own tips to save up for a deposit was to sacrifice, […]

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Essential Tips for First Home Buyers

by Chris Lang on September 7, 2010
Essential Tips for First Home Buyers

If you had a best friend who was also a mortgage broker, and you were to ask him “Hey Matt, I’m buying my first house, any advice?”, here is what he would say: 1. Know Your Credit Score Before You Buy a Home If you know you’ve had credit issues in the past, such as […]

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Buying a house: the great Aussie dream or the great Aussie nightmare?

by Chris Lang on July 12, 2010
Buying a house: the great Aussie dream or the great Aussie nightmare?

Saving Money Let me ask you a question:

If you’re 25 now and dreaming of buying a house, how old will you be when you actually move in?

According to the latest report from Bankwest, the correct answer is “almost 30, and you can’t do it alone”.

But why? Because the time it takes a young couple (not a single person, but a couple!) to save $85,000 for a deposit (a mere 20% of the median house price) is 4.5 years. Buying a unit won’t be much of a shortcut – you’ll have to spend 4.3 years saving, almost the same time.

Shocking? That would be an understatement.

This calculation implies that a couple should save 20% of their gross income annually, to get there. This means that it will be even a larger proportion of their net income.

Just one year ago, instead of saving 4.5 years, the same couple with the same income had to save up for just 3.7 years. This is the problem with boosted government grants, you see – they blow up the prices out of proportion, and then the grants are reduced to pre-boost levels – but the prices remain ridiculously high.

I don’t really see a way around this situation. Unless house prices return to reasonable levels due to some divine intervention, or unless people are willing to compromise and choose to buy a house in a much less expensive area, it will be necessary save for that long. Not many people will be in a position where they can save more money faster, because it takes at least 2 major, not easily achievable, components – a high wage job and discipline.

Those interested to see areas where they can buy a house quicker should have a look at the maps in the report – the color-coding shows which areas are more affordable then the others. Choosing a more affordable area can halve the time spent saving.

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First Home Buyer Grants: the good news

by Chris Lang on July 8, 2010
First Home Buyer Grants: the good news

Pretty House If you are considering purchasing your first home in Victoria, the good news is that our government might give you more money.

From the 1st of July first home buyers purchasing a newly constructed home may be eligible for an increased First Home Bonus of $13,000. People buying their first (newly constructed) home in regional Victoria got even luckier – on top of First Home Bonus they may be eligible for another payment of $6,500, the First Home Regional bonus. This is all in addition to the First Home Owners Grant ($7000), of course.

It is funny how these adjustments to grants and bonuses point at the main goal. What the government would really love to see people doing is showing preference to newly constructed houses (as opposed to the established ones), so they take the 2K bonus that established houses were previously eligible for and give it to the newly constructed homes in metro and regional Victoria, raising the total amount from $11,000 to 13,000. And to encourage people to buy homes in regional Victoria even more – they raise the regional bonus another $2000 – from $4,500 to $6,500.

Another funny little detail that I noticed is that to qualify for the FHOG the property should cost less than 750,000 – when previously it was caped at 600,000. I wonder if this is because the median prices went up 25%(!) last year. What do you think?

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The New And Improved Realestate.com.au

by Chris Lang on April 20, 2010
The New And Improved Realestate.com.au

I’ve always found house-hunting to be stressful, but never imagined other people would feel the same way – I thought it was just me and my partner who would get nervous, frustrated and fight about which property we should or shouldn’t buy. Well, guess what… I was dead wrong. And here is the undeniable proof: […]

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Co-owning a house – things you must know (part 2)

by Chris Lang on October 23, 2009
Co-owning a house - things you must know (part 2)

Joint TenancyIf you’ve read my last post, you know that there are 2 ways to own a house, one is called “tenancy in common” and the other is called “joined tenancy”. Why do you care? Because choosing one over the other could mean that you leave no inheritance to your dependents.

Joint tenancy

Joint tenancy means all the tenants own equal shares of the property. As a direct consequence of this it’s impossible to divide the ownership, for example, seventy-thirty – which is not good in a situation where 2 owners haven’t invested equal amounts of money into the property.

Another interesting thing to know about joint tenancy is what happens to the property when one of the tenants dies. His or her share automatically passes to the other tenant, or if there is more than one, is shared equally between them all.

Co-ownership agreement

This document is a must-have for any kind of joint tenancy. It should list all the potential problems, all the disputes that may arise between the owners and ways to settle them. To give you an idea of a dispute, it could be that one owner wants to refinance and the other one doesn’t, or one owner defaults under the finance and the others get affected by it.

How to choose

The main reason to choose tenancy in common over a joint tenancy would be control. If you want a complete control over your share of the property – go for tenancy in common. If you want to make sure that your share passes on your heirs when you pass away – choose tenancy in common. And remember that you need a valid will that specifies who you’d like to have it.

Another consideration is financial risk. If you are exposed to a greater financial risk than your partner (and you are buying a house together), consider making your share smaller in case your creditors go after your house.

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Co-owning a house – things you must know (part 1)

by Chris Lang on October 18, 2009
Co-owning a house - things you must know (part 1)

HousematesAccording to the media this scenario happens quite a bit – young people can’t afford a house on their own, and friends or relatives are ending up buying a house together. This sure is a way around the lack of affordable housing, but what happens when there is a dispute?

Let’s think about this for a moment – we have a house with more than one owner, and in case the owners decide they want to go their separate ways, how do they split the house? Fifty-fifty? Sixty-Forty? Seventy-Thirty?

Even in cases when there are 2 owners and they are a married couple, things aren’t simple. I have the same amount of patience for legal matters as the next girl, but these things need to be read once, remembered and acted upon correctly – or your financial future and that of your loved once can suffer.

As someone who isn’t qualified to dispense legal advice, I will just bring the issues up and then leave it up to you to think about them and decide that you’re either not interested because it’s not going to happen to you anyway – or to be better safe than sorry and ask your solicitor or conveyancer.

Let’s begin with the benefits of co-owning a house, or reasons to do this in the first place.
Buying a house with a friend (or even friends) allows you to pool money together to put a deposit down, your borrowing capacity grows, you pay only a share of purchasing costs (building / pest inspection, legal fees, stamp duty), you can split the costs of owning (council rates, maintenance costs, etc).

And now let’s talk about the ways of co-owning. Basically there are 2 ways of owning a property together with someone else: tenancy in common and joint tenancy. These boring legal terms may sound similar but there are differences and if you’re not careful, these differences can cost you a lot of money.

Tenancy in common

Tenancy in common allows you to specify the proportion of the house that you own. For example, if 3 friends buy a house together and each brings a different amount of money to the table, this can be translated into them owning a different share of a house.

This is best demonstrated by an example:
Andrew, Ian and Casey bought a house together. Andrew contributed 50K, Ian contributed 100K and Casey contributed 150K. We will note in the transfer of land that Andrew’s share is 1/6, Ian’s share is 2/6 and Casey’s share is 3/6. This way transfer of land notes a fair share for every co-owner.

A good thing about tenancy in common is that each tenant has a total control over their share if property. They can sell it, they can get a loan against it, transfer it to anyone, etc.

In my next post I will explain about joint tenancy, and then compare the two and their consequences for the co-owners. Stay tuned!

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What mortgage stress is and why should we care

by Chris Lang on September 3, 2009
What mortgage stress is and why should we care

Mortgage stress
If you watch or listen to or follow the news in whatever way, you couldn’t have missed this bit – on Tuesday this week the interest rates were left on hold by the RBA.

Phew… that was close.

What was close, you say? Mortgage stress, that’s what. For the folks who only heard about the mortgage part, but never about the stress part, here the exact definition of a mortgage stress: when people are paying above 30 percent of their income on mortgage repayments, they are under mortgage stress. In basic human language it means that they find it much harder to make the ends meet.

If this article catches you before you made a decision to take a mortgage, good. Because there is something you need to know: Reserve Bank of Australia (RBA) governor Glenn Stevens said that anyone taking on a new mortgage should allow for at least a two percentage-point increase in interest rates. Translation: they are going to increase the rates in the nearest future. To avoid getting into a loan that is too heavy for you, see what your repayments will be if the interest rates raise 2% and then see if that number is still less than 30% of your income.

Of course they won’t raise the interest rates 2% overnight, but it is possible – and even likely – that by the middle of 2010 the rates will rise 1%. I’ve never liked percentages because they can look deceivingly small and insignificant, but if you look at the real numbers – they never lie.

Let’s take the average standard variable mortgage of 270K (according to Australian Bureau of statistics). Let’s assume you’re currently paying 5% interest on that kind of loan over 15 years. Your monthly repayments would be around $2,135. This means that if you are earning anything less than $7116 a month, you’re in a mortgage stress already.

If they raise the interest rates 1%, your monthly repayments will become $2,278. That would mean that to not be in mortgage stress you’ll need to earn over $7593 a month. Do you expect a pay rise of over $5700 in the next 6 months? If you’re not, mortgage stress looks very likely to occur.

You can do this little exercise on any numbers using this helpful calculator here, and my message is loud and clear: please don’t bite more than you can chew, even if the banks let you.

Have you ever experienced a mortgage stress? How did you solve this problem?

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Things estate agents can’t get away with

by Chris Lang on August 29, 2009
Things estate agents can't get away with

Real Estate Agents

I don’t know about you, but most of the estate agents I’ve seen looked intimidatingly authoritative. As a direct consequence of this appearance, when they speak – you listen, when they demand – you sign, when they say “jump”, you ask “how high?”.

But there are certain things even Estate Agents can’t get away with :)

Tenants

They can’t raise your bond, even though they have raised the rent. If your rent has been increased and you’re paying more than $350 per week, it doesn’t mean that your bond will be “topped up” and you won’t have to pay an additional bond. If they try to pull that on you, contact Consumer Affairs of Victoria (or your respective organization in another state).

Landlords

They can’t neglect checking references or not verify the information on tenant’s applications. They also can’t choose a tenant without your approval. If they do, this is a breach of property management agreement you’ve signed.

If they don’t have an “authority to manage” – a signed document which makes them your appointed Property Managers – they can’t claim or charge you any commissions or expenses.

Home buyers

If you’ve made an offer on a house, they can’t call you and say “Congratulations, the house is yours!”, and the next day call you with “Sorry, the vendors change their minds the last moment”. It is illegal for agent to mislead you regarding the status of your offer and in case you incur expenses because of such incident, you have a case.

One example of such misleading was John (not his real name). He submitted an offer on a house, subject to financing, and was notified by the estate agent that his offer was accepted. John was excited and contacted his lender immediately to arrange for property valuation – a standard procedure. What he didn’t know was that on the same day 2 offers were submitted to the vendor, his and another person’s, and in the end the vendor signed the other purchaser’s offer. John filed a complaint and the agent, with his tail between the legs, refunded the valuation fee John had to pay.

Do you have a story of your own to share about what estate agents can and can not do?

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