Don't pay another cent to your landlord

Don't Pay Another Cent To Your Landlord

Don't Pay Another Cent To Your Landlord (Your Rent Could Buy You A Home)

Don't Pay Another Cent To Your Landlord

Our promise to you Since 1988 we have strived to provide the very best real estate service in Sydney to the many property buyers, sellers, investors and tenants who call on us for help and advice each week.

This booklet and the advice it contains is part of that promise. We hope you enjoy the content and profit from the experience.

Remember, our offices are open 7 days a week to help you with any real estate matter so be sure to call us if you think we can help.

You'll find contact details for your nearest Prudential Real Estate office on the back page of this booklet.

2

Don't Pay Another Cent To Your Landlord

Don't Pay Another Cent To Your Landlord (Your Rent Could Buy You A Home) E ve r y we e k t h o u s a n d s o f p e o p l e throughout Australia reach deep into their pockets for the weekly rent.

In our area, the average rent is now well over $300.00 per week.

In other parts of Sydney, the average rent is now in excess of $500.00 per week.

When you stop and think about it carefully the rent you are paying each week is probably helping your landlord pay off their mortgage on the property you call home.

In effect, you are assisting him or her build their wealth and at the same time you are diminishing your own wealth - after all we've all heard the expression "rent money is dead money".

But how do you escape the rental cycle and buy your own home ?

Hopefully, in the next few pages we'll be able to answer that very question and give you a few clues to help increase your personal wealth.

Don't Pay Another Cent To Your Landlord

1. Why Buy A Home?

Some years ago, a large Insurance company conducted a survey.

They followed the fortunes of a group of their policyholders for more than a generation.

They concluded that out of every 100 people working today only one will retire w e a l t h y, 4 w i l l r e t i r e f i n a n c i a l l y independent and 15 will have some savings put aside. Unfortunately as many as 80% will be dependant on the pension, still working or flat broke when they reach the age of 65.

Which category will you fall into when you reach 65?

Like most of us, the average Australian finds deliberate saving very difficult. And unless we are forced to save, most of us will tend to spend more than we earn.

On the other hand, if we don't save we'll end up in the last category above - broke at the age of 65.

The answer for most us has traditionally been a mortgage on the family home. The re q u i re m e n t to m e e t t h e m o n t h l y mortgage repayment is, in effect, a forced savings programme.Having to meet our monthly mortgage repayment saves us from spending the money elsewhere and, over time, helps us to retain a good part of our earnings in the equity we have in our home. ... (continued)

4

Don't Pay Another Cent To Your Landlord

1. Why Buy A Home? (continuation)

No wonder the family home has become our largest asset.

There are other benefits as well.

When you rent you never know when the Landlord might put your property on the market for sale - when you own your own home this is no longer a problem.

When you rent you are dependant on the Landlord to provide maintenance on your property - when you own your home this is no longer a problem.

When you rent you never know whether the Landlord will renew your lease - when you own your own home this is no longer a problem.

After considering all these issues most people would agree that buying your own home is a very good idea and a long term solution to building personal wealth.

Don't Pay Another Cent To Your Landlord

2. But we'll never be able to save a deposit!

Many renters will say that there's simply nothing left each week after paying the rent and buying the groceries.

That may be so but here's a few ideas that might help you save for a deposit . . . a. Give yourself a rent increase If your agent rang you tomorrow and said the rent had gone up by $20.00 or $40.00 per week most of would grin and bear it. We'd find the money somewhere.

If, on the other hand you decided to give yourself a rent increase and put the difference away in a savings account you would save a great deal of money in just one year.

Saving $40.00 per week for a year comes to more than $2000.00. And these days you can arrange these things with your bank as direct debits from your account (into a special savings account) at very little cost. In this way you'll never see the money (until you are ready to buy a home) b. The First Home Owner's Grant The First Home Owner's Grant allows any first home buyer a grant of $7000.00 towards the purchase of their first home.

Although most banks will not allow you to use this grant as apart of your deposit they will let you use the money to pay legal costs, stamp duty etc.

Either way, $7000 comes in very handy when you are buying a home. ... (continued)

6

Don't Pay Another Cent To Your Landlord

2. But we'll never be able to save a deposit! (continuation)

c. What about a "Gift" A "Gift" is an amount of money provided by one person to another for use as part of their deposit when buying a home.

For example, many parents have provided a "Gift" to their children when buying their first home.

Most Banks will accept a "Gift" as part of your deposit. d. Other things you may not know about Banks will also take into account a raft of other things when calculating your deposit and your borrowing power. For example . . . Ÿ

Gifts of money, lump sums from any source

Ÿ

Lump sum payments or payouts of any kind

Ÿ

Inheritance

Ÿ

Parenting allowance

Ÿ

Permanent pension

Ÿ

Disability allowance

Ÿ

Superannuation / annuity from the army

Ÿ

Investment income from any source

Don't Pay Another Cent To Your Landlord

3. What can you buy?

Every week you pay the rent.

Sometimes you pay the rent week after week after week after week . . . for weeks and months and years.

What if you were paying off a mortgage with the same money - month after month?

the type of mortgage you could pay off with the rent you pay each week.

For example, if you were paying $400.00 per week in rent you could also pay off a loan of $260,000. If you added to that a basic deposit of just 5% you would be able to buy a property up to (approximately) $275,000.

The table below gives you some idea of

If the interest rates go down at any time in the future the amount you could borrow would go up. Unfortunately the opposite is also true - when interest rates go up your borrowing power goes down.

Rent paid per week

Equivalent mortgage

Approximate 5% deposit

Available purchase power

$350.00 per week

$228,000.00

$12,000.00

$240,000.00

$400.00 per week

$260,000.00

$13,500.00

$273,000.00

$450.00 per week

$293,000.00

$15,400.00

$308,400.00

$500.00 per week

$325,000.00

$17,100.00

$342,100.00

$550.00 per week

$358,000.00

$18,800.00

$376,800.00

$600.00 per week

$390,000.00

$20,500.00

$410,500.00

These figures are based on a 30 year mortgage at 7.00% variable. No consideration has been made for the normal additional costs involved with the purchase of property such as solicitors fees, stamp duty, etc.

Prospective borrowers should always make their own independent enquiries before applying for a mortgage.

8

Don't Pay Another Cent To Your Landlord

So, ask yourself, how much are you currently paying in rent each week.

Take your weekly rent and multiply it by 650. This will tell you how much you can borrow.

(Naturally, these figures should be confirmed by your bank or mortgage broker and can vary with any change in interest rates. The figures used in all these illustrations are based on a standard principal and interest mortgage at 7.00%) Buying a home has never been easier.

Banks and lending institutions of all kinds have gradually relaxed their lending policies over the years making it much easier to buy a home. And with interest rates at historically low levels, there has never been a better time to buy.

In closing, we should issue one final note of warning for anyone contemplating the purchase of a property.

Property prices rarely go down.

Over the long term, property prices will continue to rise. And although there are occasions where the market "corrects" property prices these moments are short lived.

The message is buy sooner rather than later - prices will never be this good again.

IMPORTANT: All information contained herein is gathered from sources we deemed or believed to be reliable at the time of publication. Prudential Real Estate does not warrant the accuracy of the information and interested persons should rely wholly on their own inquiries including advice from a solicitor or accountant before entering into a property transaction of any kind.

Don't Pay Another Cent To Your Landlord

Would you rather buy than rent?

Here’s what you need Ÿ

Stable income

Ÿ

5% deposit (e.g., $15,000 to purchase a $300,000 property)

Ÿ

Clear credit rating

Ÿ

Good conduct of your credit cards, personal loans etc

Ÿ

And the ability to re-pay a home loan (you are already paying rent - a home loan might only be a little bit more than your rent at the moment)

How do you get things started? Speak with an experienced mortgage broker like Craig Corbett Mortgage brokers can save time

Most mortgage brokers don't charge you

The choices now available in the mortgage market can seem limitless and completely overwhelming. You can choose to research the subject, the lenders and their products yourself, or work with a mortgage broker who already has that knowledge.

Most mortgage brokers don't charge a fee for their service as the lenders pay them a commission for the loans they write. Most lenders offer the same rate via the mortgage broker as they would directly, and a broker could save you money in other ways.

Mortgage brokers give you choice

Mortgage brokers can help you avoid pitfalls

All mortgage brokers have a panel of Lenders from which they recommend a loan. They have to become accredited with the lender to offer their product, and are required to keep up-to-date with their latest offers.

Many products seem to offer a great deal but they could have penalties, fees and charges you may not be aware of. Or, they may not offer the flexibility you require in the future. A mortgage broker can help you avoid taking out a loan you might later regret.

Mortgage brokers can help find the right loan The best deal is not necessarily the cheapest rate. A good mortgage broker will examine your circumstances and future plans to recommend a loan that is right for you. Having an appropriate loan which works for you can help you build wealth.

10

Craig Corbett is our recommended mortgage broker. He is available 7 days a week to assist you with any home loan question. Call him today on 0418 204 120.

The only mortgage brokers to deal with: MFAA members A good mortgage broker can save you time and money, and give you peace of mind. But, remember, only work with mortgage brokers who are members of M FA A - T h e M o r t g a g e & F i n a n c e Association of Australia.

Don't Pay Another Cent To Your Landlord

10 pitfalls to watch out for when shopping for a home loan ...

1. The Honeymoon Rate You will be instantly attracted by the interest rate offered for the first year of your loan term. The honeymoon period does not last. The rate will usually revert to the Standard Variable Rate after the first year, which could be costly in an increasing rate market. There are often heavy penalty costs if you want to leave the relationship, and there are usually monthly account keeping fees too.

2. The Fixed Rate Loan If you opt for a Fixed Rate Loan you may be penalised for making higher repayments or paying it off in lump sums. Substantial penalties may also apply if you pay off your loan before its due date.

3. The Split Loan If you split your loan and have part fixed and part variable, some lenders charge you set-up fees, account fees and discharge fees on both portions of the loan.

4. The Wrong Loan A Line Of Credit Loan may be the wrong one for you. It is like a credit card and if you are undisciplined you may find yourself in financial strife.

5. Upfront Costs Some lenders charge you an ‘all up’ establishment fee, which includes the banks’ legal costs, an application and a valuation fee. Others add ‘security costs’ as an ‘upfront fee’ and then boast that they give you no on-going fees!

6. Loyalty to a Current Lender New borrowers will probably get a better deal than you.

7. Exit Costs When you pay out a loan, watch for the exit costs. The lender may charge you legal and preparation fees to discharge your mortgage, and some even sneak in a service fee.

8. Paying for the Bells and Whistles’ Loan Yes, you do pay for what you get. The more flexibility you get the higher the cost. Do you really need a re-draw facility? It could cost you a 0.5% premium and you’ll have to pay a fee for the privilege of getting your money back! On a loan of $150,000 over 25 years it could cost you $13,000!

9. The Package Deal Some lenders offer banking packages and discounts which may reduce the cost of your everyday financial needs or provide significant discounts to certain groups. So shop around for the best deal.

10. Not Seeking the Right Advice MoneyQuest is one of Australia’s most innovative and respected mortgage brokers. With access to a large panel of lending institutions and an extensive range of loan products, your MoneyQuest Loans Consultant will listen to your needs, thoroughly explain all the options, and help you to choose the right loan for your requirements. What’s more, because the lender you choose pays us, we do not charge for our service, although other fees may apply.

Where to now?

Call Craig Corbett today on 0418 204 120.

He will be happy to speak with you on the phone about your home loan needs.

Title of Booklet Here jyp

CAMPBELLTOWN Serving the local community since 1988 47 Queen Street, Campbelltown Phone 4628 0033 INGLEBURN Serving the local community since 2000 31-33 Oxford Road, Ingleburn Phone 9605 5000 LIVERPOOL Serving the local community since 1994 3/52-58 Memorial Avenue, Liverpool Phone 9822 5999 MACQUARIE FIELDS Serving the local community since 1994 Cnr Saywell & Fields Roads, Macquarie Fields Phone 9605 5333 NARELLAN Serving the local community since 2015 5 Somerset Avenue, Narellan Phone 4624 4400

prudential.com.au

PLEASE NOTE : 1.

2.

Recipients of this report are reminded that, although due care has been taken in the preparation of the within contained material, prospective property buyers, sellers and investors are always best served by making their own independent inquiries before entering into any real estate transaction.

This report has been prepared for the sole and exclusive use of Prudential Real Estate clients and customers. The whole of the contents and design are protected by copyright.

COPYRIGHT Š Michael O'Sullivan 2001-2015

4