Greetings from Scoutable and welcome to our March Wrap Up.
March saw 3,430 properties scheduled for auction across Sydney, with an average clearance rate of 62%. Melbourne saw 4,015 properties scheduled, with an average clearance rate of 55%. Brisbane saw 656 properties scheduled for auction with an average clearance rate of 37%. In comparison, March last year had an average clearance rate of 69% (4,756 properties), 69% (5,852 properties) & 51% (666 properties) respectively.
The data above shows a drop in clearance rates of 7% in Sydney, 14% in Melbourne and 14% in Brisbane for the March year on year comparison.
A home loan goes hand in hand with buying a property for most of us. I have many clients who find home loan terminology a little confusing. Let’s go through the basics, knowledge is power!
Interest rate – It’s what the lender charges you for borrowing money
Comparison rate - The comparison rate is the interest rate plus any fees the lender charges over the course of the loan. This allows the borrower to compare apples with apples. For example, an interest rate of 3.75% with a comparison rate of 4%, means there are other fees and charges amounting to 0.25% p.a. in interest.
LVR - LVR stands for loan to value ratio. This is your loan amount divided by the value of the property that you’re looking to buy. For example, you have $200,000 deposit and are looking to buy a property for $1,000,000, your loan amount would be $800,000. LVR - $800,000/$1,000,000 = 80%.
Lenders mortgage insurance (LMI) – LMI is an insurance the lender takes out to protect themselves if you can’t pay your loan. If you have a deposit of less than 20%, most lenders require LMI. The cost of LMI is paid by the borrower. The amount will depend on your deposit and loan amount.
Serviceability – Lenders need to investigate your financial situation to make sure you can make your mortgage repayments. This is call loan serviceability. They look at your current and historic income and employment, expenses, savings, debts and lifestyle to ensure you are able to repay your mortgage. Each lender has different calculations to work out your serviceability. Lenders have to allow for movements in interest rates and calculate your borrowing capacity on interest rates around 2% higher than the current average.
Conditional pre-approval – The lender has assessed and approved you for a loan to a certain price. Pre-approval allows you to make offers or bid at auction. However, there are usually conditions to your approval. The main condition would be a satisfactory valuation of the property. Other conditions might relate to your personal circumstance, for example, reducing a credit card balance or showing updated pay slips etc.
Formal approval – Once the lender has valued the property and confirms other set out conditions in your pre-approval, they will provide formal /unconditional approval of the loan. Formal approval usually occurs during the settlement period.
Variable interest rate - The most popular type of home loan rate. The rate changes over time depending on the state of the economy. If the rate goes down, you win with lower repayments, if the rate goes up so do your repayments. Variable interest rate home loans usually come with offset accounts or redraw facilities.
Fixed interest rate – Locks in your interest rate for a certain period of time, usually one to seven years. Fixed rate loans are a great option for borrowers on a strict budget who need the certainty of knowing the exact repayment over a period of time. The main negatives of a fixed interest rate loan are they generally don't have an offset account, and have early break costs.
Split rate loan – Hedging your bets. Split rate loans allow you to have a portion of your loan as fixed interest and a portion as a variable interest loan.
Interest-only loan – This is where you are paying only the interest on the loan. In a standard home loan, your monthly repayments are allocated to a portion of the principal (loan amount) and to the interest charge. An interest only loan is for an agreed period of between one and ten years. Remember, with an interest only loan you will pay more interest over the life of the loan as you are not paying off any of the principal.
Offset account - Think of it just like a savings or bank account. If you direct wages and any surplus cash into your offset account, you will be paying less interest and more off the principal of your loan. The balance in the offset account is offset daily against the home loan principal. For example: You’ve got a home loan of $400,000 and have $10,000 in an offset account, this means you’ll only be charged interest on $390,000.
Extra repayments facility - Extra repayment facility allow you to make additional payments on top of your regular payments at no extra cost. This will assist you to pay the loan off faster and shorten the life of the loan.
Redraw facility – Redraw facility allows you to access the extra repayments you have made on your loan. This could be for any reason, i.e. home upgrades or unexpected expenses. This feature is not available with fixed interest home loan.
We highly recommend utilising the expertise of a mortgage broker when searching for the right home loan.
If you are thinking of buying or investing in Australian property, get in touch to learn about Scoutable's services and how we can assist with your property search.
Until next month,
Kellie Landrey | Principal Buyers Agent
IN THE NEWS
INDUSTRY LEADERS SPEAK OUT ABOUT LABOURS PROPOSED CHANGES TO NEGATIVE GEARING AND CAPITAL GAINS TAX CHANGES
https://therealestateconversation.com.au/news/2019/03/29/pca-and-reia-speak-out-after-labor-announces-start-date-proposed-negative-gearing
ARCHITECTS TO CHOOSE ETHICS OVER AESTHETICS FOR CLIMATE CHANGE
https://www.dezeen.com/2019/03/28/opinion-christine-murray-climate-change/
106 YEAR OLD KENSINGTON HOME SELLS FOR THE FIRST TIME
https://www.realestate.com.au/news/106yearold-home-sells-for-first-time-at-350000-above-reserve/
PROPERTY OF THE MONTH
100 GREAT BUCKINGHAM STREET REDFERN
100 Great Buckingham Street is located 2.7km from Sydney's CBD. Great Buckingham Street is considered one of Redfern's best streets due to the quiet cul-du-sac position, the width, the heritage listed terrace facades and beautiful trees. The proximity to Redfern Park, Redfern’s retail facilities and public transport complete the appeal.
The property is set on 160sqm of land with a 5.5metre frontage. The layout comprises of formal living and dining areas, a separate family room adjoining kitchen, bathroom and laundry downstairs. Upstairs provides four bedrooms and one bathroom. The property also features a courtyard with rear lane access and potential for parking (subject to council approval).
While the eighties renovations are hard to ignore, there is still plenty of evidence of the 1890s charm such as twin fireplaces, ornate ceiling roses, timber framework and detailed cast iron lace balustrades.
Entirely liveable, there is scope to further improve in one of Sydney's most booming areas, within walking distance to Redfern Station, Central Station - both under 10 minutes, The University of Sydney and the CBD.
The price guide is $2,000,000 with a rental guide of $1,200 - $1,300 per week.
If you'd like to know more about this property or any others, please get in touch.
