Goodbye Renting

by Tracy Lee Harvey

  years. He looked around and admired the changes. The new environment made

  him feel exhilarated… alive again.

  He started to think about al the positives in his life, deciding to work through

  all the adversity by keeping those positives in the forefront.

  Warren had a garage sale, selling of all the material non-essential he had

  accumulated when he had had money to burn. He also began working at a

  parking allotment in the city. He sat inside a booth and collected parking money.

  This gave him the opportunity to interact again with the outside world. The

  money he earned was invested into fixing up his unit so he could sell it at a

  premium price, which he did. The unit was sold and Warren paid out his ex-wife

  with enough money left over to purchase himself another property with a small

  mortgage.

  Warren also began to at end meetings for people who were addicts. His

  regular at endance kept him disciplined and focused. He still suf ered with pain,

  but his treatment now involved naturopathy, massage and yoga.

  Within a year, Warren had turned his life around. He paid extra payments of

  his mortgage and invested extra income into a managed funds for his daughter.

  He didn’t feel the need to medicate himself any more, believing that yoga and

  the joy of his newfound life would give him the strength to overcome any pain

  that might arise.

  His optimum and zest for life were infectious, which at racted a great many

  women to him, but it would be five more years before he would propose

  marriage again and this time it would be to his lifelong partner. Warren worked,

  planned, invested and enjoyed his passion for rock climbing. He had two more

  91

  children, both boys, who were encouraged and supported to achieve their

  dreams, but the proudest day of Warren’s life was the day he walked, aided by a

  prosthetic leg, down the aisle with his daughter. He sometimes reflects on what

  he could have missed out on had he continued down the road of self-

  destruction, and is ever grateful to his daughter for giving him the strength to see

  that life had so much more to of er. Warren continues to enjoy a long, happy,

  fulfilling life.

  92

  The action list for getting a loan

  Find out how much you can borrow and what type of

  loan fits you!

  If you’re told you can’t borrow from one lender, for whatever

  reason it might be - ask them what I need to do to qualify and work

  towards fitting the criteria. In the meantime keep checking out other

  lenders!

  Banks

  All banks have particular criteria attached to their loans and they can

  differ greatly from one bank to the next.

  If you don’t fit that criteria - don’t blame the bank!

  Don’t say, “I can’t get ahead because the bank won’t loan me any

  money.”

  What you need to do is to find out what the bank’s requirements are

  and make yourself fit.

  If you get a ‘NO’ from the banks don’t be put off. Rise above it and

  ask the ‘why?’ question. Then plan what you can do to achieve the

  requirements.

  Work to fit the criteria which are closest to your circumstances and if

  you can’t find one in the major four banks, then look further afield.

  Don’t assume it’s hopeless.

  Get out there and do, do, do. This may include getting a second job,

  having a garage sale, selling things online, cleaning out your belongings,

  ringing as many financiers as you can, or in writing letters.

  Get determined in everything you do.

  Lenders vary with the amount of money they will loan and each has

  their own lending criteria. SO KEEP THAT IN MIND - don’t be

  disillusioned just because one lender has knocked you back, keep on

  93

  trying.

  Having said all that, there is one key element that lenders almost

  always take into consideration - your savings pattern, especially when

  you’re a first home purchaser. That is why I have consistently,

  throughout the book, urged you to cut expenditure and to start putting

  money away. Even small amounts of regular deposits which have built

  up over time will demonstrate you have the discipline to SAVE.

  Of course, having a deposit will also stack the cards in your favour.

  Having said all that, you might in fact get a loan that won’t require

  any deposit whatsoever.

  If this is the case then you need to recognise that the less money you

  put in yourself the more you will borrow and you’ll consequently pay

  more interest over the next 30 years. The other key factor to No Deposit

  Loans is the rate of interest that you pay. It is generally higher than the

  standard variable rate. You will also be required to take out LMI

  (Lender’s Mortgage Insurance); this is an insurance to protect against the

  risk associated with lending money to a borrower who may default. Of

  course that insurance is an added expense to you and is usually

  incorporated into the loan.

  ALWAYS… Consider the other costs you will incur such as stamp

  duty, registration of mortgage documents and solicitor’s fees. So tally up

  those added expenses to show your TRUE COSTING.

  Concessions on stamp duty apply in Australia when you buy as an

  owner occupier. However, the cost is considerably higher when the

  purchase is for investment purposes.

  The home loan maze

  One of the biggest challenges for any first home buyer

  is the prospect of getting a home loan. If it is your first

  home loan and you’re a little anxious about whether

  you’ll get a home loan or not your reaction is to be

  expected. However, if you don’t qualify with the first

  or second lender, then all is not lost.

  Once upon a time, you went to the

  lender with pleading eyes, hand on heart, almost

  begging for a loan. If you got it, you were thankful

  beyond belief that the bank had given you a loan…

  any loan!

  Thankfully, times have changed and you need not be as desperate

  when applying for a loan. Now, a lender is more likely to give you a

  94

  loan because they need the business, but if you’re sensible you won’t

  just take a loan even if it is offered.

  Many loans in recent times have been shown to be difficult to

  comprehend for the average consumer and as such the consumer has

  signed themselves into something that doesn’t necessarily meet with

  their finances or their needs. Unfortunately, once you’ve signed on the

  dotted line it is very hard to get out of a loan without paying your way

  out. That’s why it is in your very best interests to research and research

  again just what is on offer.

  If the home loan product is too difficult for you

  to grasp, find one that you can understand and

  feel comfortable with - don’t take a loan just

  because you can get it.

  Something I would highly recommend is that you seek

  independent financial advice before signing a loan document. This

  may cost a little extra but is well worth the price when you’re

  entering into something that is
as serious as this without the

  knowledge or expertise that only comes from experience.

  Remember, this is all about you and your best interests. Not the

  lender’s!

  The 100% lend for your home

  So you don’t have a deposit!

  Well, you could try for the 100% loan now available through

  some financial institutions.

  Yes, there is such a thing as borrowing 100% of the loan. It is often

  called the ‘No Deposit’ mortgage and allows you to borrow the whole

  purchase price of the property. With spiralling housing prices this is

  definitely an option worth considering but approach with CAUTION.

  This is an option that gets you into a property while the market is still

  moving. In some respects it can be a particularly smart move when the

  market is booming because by the time your loan is approved you could

  have already made money on your purchase.

  However, there can be problems associated with this type of loan if it

  isn’t approached with caution and here’s that word again, DISCIPLINE.

  You need this especially when the market has flattened out and interest

  rates are on the rise. Remember, when the mortgagee is taking a risk by

  giving you the whole amount they need something back in return, so

  95

  check out what is involved with the loan and what the ‘catch’ might be.

  While this is still an option for people who don’t have a deposit the

  other expenses such as legal fees, stamp duty and most likely mortgage

  insurance will all still be incurred by you.

  What other loans will help me?

  When you’re considering where to borrow for your home loan, take

  the time to find out what lenders can offer.

  There are literally hundreds of lenders now and they all come with

  their own packages and in some case bells and whistles. With so many

  lenders to choose from and so many packages to decide on you’re likely

  to get confused at what’s what. Take heed, probably the best way to

  avoid all the confusion is to seek out a mortgage broker, someone who

  has access to multiple loans and who can establish what is most suitable

  to your specific circumstances. Even then, if the mortgage broker is

  unable to find a loan for you or for that matter work with your best

  interests at heart, then source another broker. Don’t give up!

  Another consideration is the chance that you may get refused by one

  or more lenders when you do apply for a loan but that doesn’t

  necessarily mean you’re a poor candidate. It can often mean that the

  particular lender you’ve approached doesn’t have the package that suits

  you.

  It can be at the stage of refusal that many people get so disheartened

  and disillusioned that they lose the confidence to try again. This is a

  DANGEROUS point which can have disastrous consequences. Years

  can pass before that person gains enough self-assurance to try again, if at

  all.

  Loan sharks warning

  Beware of unscrupulous loan sharks. There are

  many lenders and financial institutions that can

  assist you with getting a loan, but before signing or

  entering into an agreement of any kind it is always

  in your best interests to research your financial

  lender and to seek legal advice. Most lenders will

  have legitimate business ethics and will endeavour

  to give you the best possible deal or package they

  can offer. However, there are also those who prey on the unknowing,

  often inexperienced, first home buyers. In this instance an inflated

  unnecessary loan package could be an offer that may have the potential

  96

  to place you in a situation of undue financial stress. The ultimate

  catastrophe result would be to lose your house, your saved deposit and

  still be forced to incur an outstanding debt.

  Type of loans that can help you into your first home

  Introductory rate loan

  This loan is sometimes called the ‘Honeymoon

  rate’ and for good reason. It doesn’t last! It helps

  first home buyers and those on a financial plan

  because it provides a cheaper upfront rate with

  lower repayments in the first six to twelve months.

  Nonetheless, when that period of time has lapsed the

  interest rate will rise and should then match the

  standard variable rate. I say, should, but it often

  doesn’t, instead it goes higher. It is very important to check that the rate

  will only rise to the variable rate when the honeymoon period is over

  and will not go up any higher as the savings you had made in the first

  year will easily cancelled out otherwise.

  If it does only rise to the standard variable rate you could be on to a

  good thing if you are diligent with the savings you’ve made on the lower

  rate.

  Don’t forget to ask about the interest rate at the end of the

  honeymoon time!

  This is a way of getting into your first home - check it out!

  Play it smart on this one and if possible pay a

  little extra each week so you will always be in

  front. This loan is giving you a year that could

  put you ahead financially just by pretending that

  the low rate isn’t there and so yo pay what you

  would pay when the rate increases in a year’s

  time. You will be surprised at how much

  principal you will have actually paid off by doing

  it this way and you will always be in front with

  your mortgage when times do get tough.

  Low and no deposit loans

  A low deposit loan

  - is one that only requires a 3-5% deposit on the purchase price, but

  that’s not the end of the story. The costs associated won’t be included so

  97

  you have to come up with those costs or have them incorporated into the

  loan. It is also likely you’ll incur some Lender’s Mortgage Insurance,

  albeit at a reduced amount.

  No deposit loans

  - this can be a particularly good option for people who do in fact have

  a good income but have spent their money freely on the pleasures of life

  rather than saving for a deposit. They are usually in a better position to

  afford repayments and it is definitely a way of getting into the market

  sooner rather than later. LMI (Lender’s Mortgage Insurance0 is a

  requirement because the borrowings are for 100% of the property’s

  value and the lender needs to insure against default on the added risk.

  Naturally, the insurance will be a cost to you.

  If you’re a person who has lots of toys because

  you can afford them, i.e., motorbikes, scooters,

  swooped-up cars, the latest mobile phones and

  all the gadgetry money can buy, but still haven’t

  saved a deposit, think about directing your

  expendable income into buying a house. You’ll

  always need a roof over your head and this is

  one surefire way of also getting the latest and

  greatest gadgets down the track when the equity

  accrues in your property.

  Equity releases loans or reverses mortgages

  ‘I’m too OLD to get a loan’

  No, you’re not. Financiers can no longer

/>   limit your borrowing capacity simply

  because you’re over 50. As long as you’re

  over 18 years and have the capacity to

  service the loan you can apply for a loan

  like anyone else and this could be an option

  that helps the younger generation in your

  family get into their own home.

  These loans could be a great option if

  you’re a retiree or in the older age group and want to help your children

  into their first home.

  In bygone years, lenders have been unwilling to lend to those in

  retirement age, but not now. It basically means that the equity built up in

  98

  your own home is used to improve your own lifestyle such as buying a

  caravan or that long wished for boat. It could also be used to assist your

  children/grandchildren into getting their first home. The amount you can

  borrow is limited to between 15-45% of the value of the property and

  what is something to really consider is that the repayments and interest

  are not paid until the secured property is sold or settled up with the

  estate.

  Again, the loan interest rate is generally more than the mainstream

  loans and it does have restrictions attached but is worth checking out.

  If you decide to go this way in helping your own

  family you must get legal advice and put a

  formal payment system in place requiring them

  to pay it back. Problems can occur if there is

  other off-spring not included in the loan so

  calculations need to be considered with regards

  to their share in the event of your death.

  Credit impaired loans

  You’re not out of the race for getting a home loan just because

  you’ve had a bad credit rating in the past.

  This is a loan for people who may have a poor credit history and find

  it difficult to qualify when applying for a mainstream loan through the

  usual channels. But - there is also a price to pay for this type of loan and

  it comes in the form of a higher interest rate compared to the standard

  rate elsewhere. That rate of interest will also depend on the default level

  you have experienced in the past. The lender calls this the ‘rate for risk’

  model which basically means the higher the risk you are the more you