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Carol from Vista Financial

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About Carol from Vista Financial

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  1. The Australian Prudential Regulation Authority (APRA) today announced that as of 1 January 2019 it will lift the supervisory cap it placed on interest only lending. So what does this even mean? First things first, who is APRA? APRA is one of the regulators in charge of monitoring financial institutions and basically keeping them in check. You may have noticed them in the spotlight in the Banking Royal Commission and copping a fair amount of criticism for basically coming across as being asleep at the wheel. Given the things that have come to light this is not really surprising. The general impression is they haven't been doing a very good job (i.e. a lot of wet lettuce leaf slapping - a.k.a. "enforceable undertakings"). But they have tried to put some things in place to try help. One of which was recognising we have way too much household debt (one of the highest in the world) and in particular zeroing in on the high proportion of interest only loans and associated questionable lending practices. If you're paying interest only, you're not reducing that debt, and it stays high. You might be reducing debts else where and taking advantage of tax breaks yes, but if things go south and you have to repay the debt, then you might be in a pickle. If lenders give you money you can't actually afford to repay then you might in a pickle. We want to avoid widespread financial pickles. To try reel this in, APRA announced a cap for interest only lending in March 2017 that all authorised deposit-taking institutions (ADI's) had to meet (read: people that lend us money who are regulated - full list here). The cap was 30% of all new lending, along with some extra 'don't be too risky' clauses. Did it work and what does it mean now it's being lifted? Low and behold how do you reduce the number of people applying for interest only loans/staying on them? You make it expensive. Fast forward to today, interest only rates are much higher than principal and interest rates. As result, people either haven't applied, don't meet the servicing criteria, have switched to principal and interest repayments, or have sold. For those that didn't, they've now paid ADI's a pretty penny. But this hasn't been the only thing changing in the industry - lending criteria is tighter than ever, lenders are scrambling in the wake of the Royal Commission, house prices are changing, interest rates are historically low etc. ADI's are now "... significantly below the 30 per cent threshold" so they've decided to lift this cap in the New Year and will review how things are tracking later in 2019. One may hope we would see some reprieve in the interest only rates and appetite for this type of lending to increase again, but don't hold your breath - everyone is waiting for the final release of the Royal Commission report in February. Why make changes now when you have a reason to wait? It's going to be an interesting start to the New Year.
  2. Carol from Vista Financial

    Current mortgage rates and special offers

    Happy Silly Season everyone! Here is the final rate update for the year, see you in 2019!
  3. Carol from Vista Financial

    Costs of buying a house

    Selling costs You’re downsizing (or upgrading!) and you need to sell your house – and pay someone to help you do it. Yes, there are alternatives now to the traditional bricks and mortar real estate agents who plaster their faces over letters, fridge magnets and obligatory Christmas cards each year. But regardless of who you go through, there is always a cost somewhere. You can’t sell a dirty house, nor one with that garage door you’ve been meaning to fix for years. And, unless you want some bright spark reading an article about upfront property costs and docking their offer, you will want to fix it all yourself before selling. This all costs money. It’s the property’s last hurrah on your wallet. Assuming you aren’t off in a caravan in a tour around Australia, you are probably moving into another house, and so the circle of life continues. What have I missed? Have I forgotten anything? My partner volunteers in the CFS yet he pays for the Emergency Services Levy. I can always tell when the postie has delivered that particular gem. What’s your pet peeve as a property owner?
  4. Carol from Vista Financial

    Costs of buying a house

    But wait… they don’t stop on move in day! You see a lot of pictures of happy couples celebrating in front of their ‘SOLD’ signs. You don’t see any of the grumpy looks on their faces when they receive their ongoing council rates, water, insurance and strata bills! Council rates and utilities (water/gas/electricity) They keep coming. They are due quarterly, and don’t stop once you have the house. Sorry! Ongoing strata fees These are ongoing too and, depending on the age of the properties and common areas, from time to time certain upgrades may be needed. These may be substantial if the properties are quite old, and the pool that you so loved but now hardly use may cost an arm and a leg in upkeep. Insurance Building insurance doesn’t protect the things inside your house. As a rule of thumb, if it’s not attached to the walls, it probably won’t be replaced. Contents insurance protects your personal effects (read: your stuff). Think of all the things you own – not just furniture and whitegoods, but your clothes, shoes, electronics, books, jewellery, pet rock collection – the lot. Your house burns down and you have to replace it all as new. How much will it cost you? Now look in your bank account. If you don’t have this money sitting there, just in case, then you need to look into contents insurance. The idea of insurance is simple – you either do it yourself, by having a rainy-day fund (i.e. “self-insure”), or you pay someone else to cover that cost, just in case (e.g. you have outsourced the risk to someone else, and compensate them by paying a premium). It’s up to you; just don’t think it will never happen to you – famous last words. Repairs and maintenance Back when I used to rent, my housemate and I lived in a quaint and much-loved townhouse that had ugly blue and yellow 60’s tiles in the upstairs bathroom. The water pressure was so bad up there that having a shower was never a leisurely affair. To make it worse, when we asked the real estate agents if something could be done, they replaced the shower head with a water saving one. Well, if I thought it was bad before… But it would save the owner money and, from then on, we gave up and kept our mouths shut unless something serious broke and needed fixing. And that is renting. You suck it up, because it’s not your house. You get what you’re given, because you don’t call the shots. Then suddenly you are a Home Owner. You can choose what shower head you want, how much water you want to waste through it and to rip up those vomit coloured tiles. But you also have to pay for it. When you get the quote for how much it will cost to re-do the plumbing upstairs you will understand why a new shower head may be good enough.
  5. Carol from Vista Financial

    Costs of buying a house

    Insurance Most banks will require building insurance on the property, as they are relying on it as security and can’t have it burning down etc. The amount of insurance needed may be dictated by your lender based on the minimum replacement value as told by the valuer. Some mandate full replacement – which does not specify an exact value, but basically covers you to replace it anyway, no matter what it costs. Of course, the latter can be more expensive, and policies are few and far between. The lender is legally not allowed to force you to insure with a particular company, so don’t get sucked in. Do your research and find something suitable too. Be wary of cheap providers – if it’s too good to be true, it probably isn’t. You will need to pay for the premium (normally the first month) to get the policy in place, and the lender will want a Certificate of Currency. This is a different document to just the premium schedule they send to you. It normally notes who the policy holder is, what it covers (i.e. a dollar amount or full repayment), the period of time the policy is valid for, and any interested parties. By interested parties, it means the bank (e.g. Interested Party: “Bank of Carol Limited”). Some can be pretty fussy about how their names are listed on these policies (e.g. no abbreviations such as “Bank of Carol Ltd”), so ask your broker or lender what is specifically required. Moving costs You need to get your stuff there. If you don’t have a trailer or a mate who will give you his ute for the day in exchange for a carton of beer, you may be in a pickle. The cost to move your entire life from one house to another can be super expensive – especially if they charge by the hour and you are moving to the other side of the state! So, get some quotes and make a game plan. Also work out your timeline - when you will have your keys and when you can move your things – will it be the exact day of settlement (and, if so, what time exactly) or the weekend after? Will you have to pack your things and pay someone to just move them, or will they do the packing and unpacking for you? If you have been living at home, don’t underestimate the cost of stocking up your cupboards and buying home essentials. Do you know how much it costs to stock up on herbs? You will know soon enough, and will quickly realise how lucky you had it at Mum and Dad’s.
  6. Carol from Vista Financial

    RBA cash rate decision 4 December 2018

    Merry Christmas says the RBA. No changes to the cash rate. Here's some interesting bits of today's announcement, which will be the last until 2019: "The global economic expansion is continuing and unemployment rates in most advanced economies are low. There are, however, some signs of a slowdown in global trade, partly stemming from ongoing trade tensions... Financial conditions in the advanced economies remain expansionary but have tightened somewhat. Equity prices have declined and credit spreads have moved a little higher. There has also been a broad-based appreciation of the US dollar this year. In Australia, money-market interest rates have declined, after increasing earlier in the year. Standard variable mortgage rates are a little higher than a few months ago and the rates charged to new borrowers for housing are generally lower than for outstanding loans... One continuing source of uncertainty is the outlook for household consumption. Growth in household income remains low, debt levels are high and some asset prices have declined. The drought has led to difficult conditions in parts of the farm sector... Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low. Credit conditions for some borrowers are tighter than they have been for some time, with some lenders having a reduced appetite to lend. The demand for credit by investors in the housing market has slowed noticeably as the dynamics of the housing market have changed. Growth in credit extended to owner-occupiers has eased to an annualised pace of 5–6 per cent. Mortgage rates remain low, with competition strongest for borrowers of high credit quality." You may read the full release here.
  7. Carol from Vista Financial

    Costs of buying a house

    Council rates, water supply, other state levies $3,000 - $3,500 (estimate only, larger purchases may be more) Council rates are a form of property tax to help fund local infrastructure and services. They are levied annually (by financial year) and normally paid quarterly. The existing owner would have already paid their rates bill, so depending on when you buy your house you will have to reimburse them a pro-rata amount from the day you take over ownership. If they have paid as an annual lump sum it may cost a fair bit, otherwise the amount will vary depending on how early or late you are buying in the relevant quarter. So, if you are buying at the end of the quarter this might not be a lot (but you will get a bill soon) or, if at the end of the quarter, it may be almost the full bill. You will have to pay it at one stage or another, but the figure you pay on settlement will depend on this timing. The same applies for water supply and other state-based levies payable when you own a house. You can check out what these may be by asking the local council or checking out their website. Strata fees If you are buying a unit (or the property is a strata or community title), strata fees may be payable. Strata is basically an arranged group whose members are normally the owners of the other units in your block. They meet regularly to discuss and vote on any issues related to the general upkeep or maintenance of any common areas, or anything else that may be applicable to all parties (e.g. changes in local government regulations, zonings, parking issues etc.). You are normally provided with a copy of the overarching rules of the strata as a governing body along with the contract of sale. This will tell you what they are responsible for, and what you are responsible for. This is particularly important when it comes to what you need to insure, and what is covered by them. It is also recommended to ask for a copy of the strata meeting minutes so you can see what is happening in the group at the moment, and in particular if there are any upcoming large costs that you may be signing up for in the process. The strata fees you pay essentially fill a bucket of money that is then used by the strata to pay for things like essential repairs and gardening of common areas. This bucket of money is called the ‘sink fund’. It’s best to check what is in this sink fund and if there is enough for what they are planning to do, because if there isn’t, guess who foots the bill? Sundry Sundry = miscellaneous costs. Expect the unexpected. The vendor dies, they’ve lost the title, there’s a caveat on the property that slows things down – lots of things can change, and when things change, they often delay, and delays cost money. The idea is to have a bit extra just in case – have the money available and if you don’t use it all then great!
  8. Carol from Vista Financial

    Costs of buying a house

    Conveyancer/legal fees $1,000 (Allowance) Conveyancers specialise in the legal aspects of transferring land ownership. You need one. Don’t try do it yourself – if you mess it up, you’ll end up spending more time and paying more money to fix it anyway. They will conduct all the appropriate searches on the property, prepare the LTO documents and attend settlement on your behalf. They also notify the council, the LTO, and any other local governing bodies that you are new owner. But they don’t put the power on for you, so make sure you organise that yourself! They normally charge around $600ish, but this can vary so ask for a quote before engaging them. It’s good to find someone local if you can, as they will need to physically ID you. If you can’t make it to their office, they may send someone out to you to do this instead, but this will cost you more, so if you want to save your pennies go with someone with a good reputation who is also accessible to you.
  9. Carol from Vista Financial

    Costs of buying a house

    Government costs Consider this an umbrella for anything you pay to the government, normally via your state’s revenue office and Lands Titles Office (LTO). Stamp duty This is a form of tax paid by you for buying the house. It is determined by the dutiable value of the property, the purpose, and the location of the property. The dutiable value is generally the purchase price or the market value (confirmed by the valuation), whichever is higher. Transfer fee When you transfer the ownership from one party to another, you are charged to update the land ownership register. This is called the land transfer fee. Mortgage registration The bank takes a charge over your property in case things go pear shaped. Worst, worst case scenario, if you don’t pay them, they can repossess the property and sell it to recoup any losses. This ‘charge’ is in the form of a mortgage. Think of it like a big IOU in the form of their name listed on your title. By looking at the title we can see who-owes-who-what. To add their name on there, you pay a set fee called a mortgage registration fee. Here is what they cost in each state: Note this is charged per security (i.e. per house). When your conveyancer gives you the list of what it’s all going to cost you, you may see two of these. The second fee is to get any existing mortgage off the property title. Yes, this is a fee the vendor pays – the person you are buying the house from. Don’t panic, I know it wouldn’t be fair to pay their fee, which you don’t – they pay it in the end, and this is sorted by the conveyancers. Sometimes, to make sure they have enough money, your lender as well as the vendor’s lender, both collect two mortgage registration fees – and the conveyancers sort any refunds needed to you after. This is just to be safe, better to get two just in case than be short on the day of settlement. Favourable purchases Special note to those hoping to work the system – if you are buying via a favourable purchase do note they will charge you based on whatever is higher – the contract of sale or the market value. A favourable purchase is basically when you are buying something cheaper than its true value – i.e. it is favourable to you. So, if grandma wants to sell you her house for two bucks, that’s fine. But you will still pay stamp duty on the full market value of $450,000. Death and taxes: you can’t escape them. Jump onto our calculator to see what these costs may be for you.
  10. Carol from Vista Financial

    Costs of buying a house

    Congratulations on preparing for the costs that lie ahead. Buying a house is exciting. And daunting. And expensive. In fact, for most it will be the single largest purchase of your entire life. If you’re lucky, you may even buy more than once! But let’s not get carried away. Over the next few days I will be posting about a different cost each day, so follow this post to be updated. -- Let's start with the immediate costs. Like a band aid, these will hurt at first. Building and pest inspection $400 - $500 (estimate only) Now, if you are from the UK, I have heard this referred to colloquially as a ‘survey’. It is important to note the differences between a survey and a building and pest inspection. Surveying or in particular “cadastral” (boundary) surveying focuses on the land itself – it’s legal ownership and exact location of associated boundaries. Building inspections focus on the structural soundness of the building. Pest inspections investigate the current or potential impact of any pests such as termites (white ants) on the property. These inspections are normally undertaken prior to making an offer or during the cooling off period after you have signed a contract. As cooling off periods can be as short as 48 hours, inspectors are used to having pretty short notice to do this, but you will have enough going on at that point, so find one you like and check their availability earlier. Once complete, you are given a report on the findings, including estimates of how much it would cost to fix anything. These serve a dual purpose of knowing what you are buying and, if there is something wrong, what it may cost to fix it. You can then use any downsides or estimated costs as leverage when negotiating the final purchase price (e.g. the vendor can fix the retaining wall prior to settlement, or you can reduce your offer by the $5,000 it will cost you to fix it yourself). It is highly recommended that you undertake building and pest inspections to make sure you are not up for any nasty surprises. This is especially the case if you are buying under auction conditions, as cooling off periods do not apply. If you don’t get the house then yes you’ve lost a few hundred, but if you win the bid and find termites too bad, so sad. You have purchased it as it is, warts and all - so buyer beware!
  11. Carol from Vista Financial

    Current mortgage rates and special offers

    Happy Hump Day! For those investment property owners or potential buyers out there, here's the scoop on current investment property rates:
  12. Carol from Vista Financial

    Current mortgage rates and special offers

    Good morning world Testing out a new format that I hope will be a bit easier to read. Let me know what you think!
  13. Carol from Vista Financial

    RBA cash rate decision 6 November 2018

    On hold again, as most predicted. "Growth in China has slowed a little, with the authorities easing policy while continuing to pay close attention to the risks in the financial sector. Globally, inflation remains low, although it has increased due to both higher oil prices and some lift in wages growth. A further pick-up in inflation is expected given the tight labour markets and, in the United States, the sizeable fiscal stimulus. One ongoing uncertainty regarding the global outlook stems from the direction of international trade policy in the United States. ...In Australia, money-market interest rates have declined recently, after increasing earlier in the year. Standard variable mortgage rates are a little higher than a few months ago and the rates charged to new borrowers for housing are generally lower than for outstanding loans. ...Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low. Growth in credit extended to owner-occupiers has eased but remains robust, while demand by investors has slowed noticeably as the dynamics of the housing market have changed." Read the full release here.
  14. Carol from Vista Financial

    Lenders Mortgage Insurance (LMI)

    What is it? Lenders Mortgage Insurance or LMI is an insurance policy that protects the bank from financial loss if you can’t pay your loan back. LMI cover protects the lender, and you pay the premium. That’s right, you are paying to protect the bank from yourself! When/why is LMI applicable? Normally LMI is required if you request to borrow more than 80% of the property value, as this is deemed riskier to the lender. Why? You’ve put less money in, your repayments will be higher, and they have more to lose. So, they hedge their bets by insuring themselves. If you default on the loan (i.e. don’t/can’t pay), they will chase you for the funds. If that doesn’t work and as a last resort, they will re-possess and sell the house to pay the debt. If the sale of the property isn’t enough to pay the outstanding debt, the lender makes a claim with the insurer to recover the difference. (Important to note – even if the lender gets all the money back from the sale or insurer, this is doesn’t absolve you from your debt – there is sadly no get-out-of-jail-free card.) How much is it? LMI can be very expensive. The cost is determined by a number of factors including the loan to value ratio (i.e. how much you are borrowing compared to the purchase price), the size of the loan you want (costs increase exponentially), if you are a first home buyer or not, and the insurer. The two main insurers in Australia are QBE and Genworth, but some lenders also self-insure. You can get a rough idea on the cost of LMI here, but take it with a grain of salt as it does vary between lenders. How do you pay for it? You can pay it upfront or most lenders will allow you to add this to the home loan amount (i.e. capitalise it). Most people opt to add it to the loan. Why on Earth would you choose to pay LMI? Saving a 20% deposit is very hard, and can be almost impossible for some. LMI enables you to purchase without having to have 20% deposit, so is actually quite a popular option. How to avoid LMI? Save like crazy to have a 20% deposit. If not, there may be other options, including gifted funds from the Bank of Mum and Dad or using a guarantor. For a lucky few LMI waivers sometimes exist with some lenders – normally restricted to those in the medical profession or specific white-collar professions. Normally strict criteria apply. Important fact to remember LMI protects the lender, it does not protect you! As a borrower, this type of insurance does not offer you any protection whatsoever. LMI is often confused with mortgage protection insurance - a type of insurance that protects you if you lose your job/fall ill and can’t meet a repayment. This is a completely different insurance, so note the difference. If you still have any questions regarding LMI, get in touch so I can help.
  15. Carol from Vista Financial

    Current mortgage rates and special offers

    Hi all A few changes. These offers are now no longer available: New offers: - 3.65% owner occupied principal and interest - 3.95% 5 year fixed principal and interest First Home Buyer (owner occupied) special - 3.95% variable investment principal and interest - 3.76% 3 Year Fixed owner occupied with offset available All other remain valid as of today. Important: These are separate offers not in conjunction with any others stated previously and are subject to meeting lender terms and conditions. Fees and charges may apply. Thank you
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