There are so many interesting myths about who the 'bank valuer'  is, and what they do, or even how hard they work, that I  thought I'd share some industry knowledge on the subject.

A Property Valuer is a qualified professional whose job is to assess the value of property. Banks and other lenders engage property valuers to undertake valuations to determine the worth of property when mortgage loan applications are made and to assess the feasibility of the proposed purchase.  They are tertiary educated and accredited by the Australian Property Institute (API).  Banks do not take into consideration real estate agent appraisals, as these are not objective or independent. 

What does the valuer actually do?

A Valuer may only spend 5-10 minutes at your house and may seem in a rush, this is because they normally have many appointments to make. Behind the scenes the Valuer is doing a lot of work. They are not so interested in the overall presentation and cleanliness of your house (although some decorum is surely to be appreciated) but they are interested in the quality of workmanship, build of the house, block features/frontages, house size and so on.

Many firms now adopt a process managed entirely through a valuation management system (VMS). Through the VMS every detail, record and dealing with the property is recorded for future reference. In general terms, to value a property a licensed Valuer will do the following:

1. Make contact to arrange inspection.
2. Compilation of property information - title zoning, problems such as bushfire or flooding and sales history.
3. Internal and external inspection of the property – detailed information is recorded directly into the VMS. The property is digitally measured and photographed.
4. In the office – The Valuer researches sales evidence and analyses the property against that evidence.
5. Provide required responses to risk questions.
6. Run a draft report against quality assurance guidelines.
7.  Check of the valuation by Senior or Managing Valuer.
8. Prepare and send the final report – typically within 24 hours of inspection.
   

Valuers are under pressure to finalise reports quickly. For the best and most efficient valuation you can provide the following:

• Correct address or title details
  
• Accurate contact details of an available person.
  
• If tenanted, contact the agent so they may provide notice for access and arrange a suitable time.
  
• Contract documents, dated and signed by the vendor where possible.
  
• Any other relevant information in digital form such as building contract or specifications and plans.
  
• Rates notice, contracts for recent works.
  
• Quotes for work to be completed.
  
• Sales evidence.
  

So for optimal results, keep the place neat and tidy, provide any information to the Valuer that might support your case, and then leave them in peace to get on with their job.

If it’s got anything to do with property, the chances are that a Licensed Valuer will be able to provide you with some of the best information available to assist in your decision making process.

What can you do if you disagree with the bank valuation?

The valuation of any property is a serious and involved process, reliant on confirmed sales in writing. If an individual truly believes in a particular value of their property confirmable sales data must be available to back it up. This sales data must include (but is not limited to):

• Recent (under 3 months preferred but less than 6 months is OK)
  
• Close by – not another suburb unless the area is remote and the property is very closely equivalent
  
• Same size property/land/aspects/house size
  
• Confirmation of sale
  

The perception that listing or asking prices on property can be used as an ‘indication’ of value is false. They in fact offer little more than an agent’s capacity to place a number on a board. A home cannot be valued based on someone’s ideal sales price. Confirmed sales in a current market (no more than six months old) are essential elements of a professional valuation.

The Lenders and how they see things

Lenders compliance managers are constantly finding ways to make the process more objective and at arms length. It is very uncommon to have a bank valuer come from the actual branch, although this does still happen, it is very rare.. Lenders are driven by their own concerns and those of the industry regulator (APRA) evidenced by the adoption of some of the following practices:

• A reduction in the number of Panel Valuers available in the market
  
• Instruction for at least 2 valuation firms almost always on a random basis (creating objectivity as you cannot choose your Valuer)
  
• Auditing of Valuer performance
  
• Standardising Service Level Agreements (SLA’s) – A preference for National Agreements with Valuers
  
• A reduction in contact between Valuer and Lending Manager/Broker. Most lenders are now using RP Data and Valex to manage the valuation order and valuer preference
  
• The introduction of a prescribed process for reviews and queries
  

Overall, it is important to take heed of the important and crucial role valuers play for the banks. They are not 'on the banks side' they do err on the side of caution but they are also under pressure to keep all parties satisfied with the outcome. As such, if you have a dispute with a valuers valuation, the best thing to do is keep calm, look at the figures they have used, and find evidence to the contrary to support your claim for a higher valuation. I have on many times assisted clients dispute a valuation with success, and worked together with the valuer to find a common ground. An important part of this process is to have data, to help support your claims.

Big changes have been developing in the lending sector in relation to investment home loans. This will affect many of you who already have, or are considering investment lending. This issue is for current and developing changes.  New announcements are coming out weekly so please follow us on Facebook or Twitter for individual lender announcements, or call us to discuss loan switching, loan review, or other general questions you may have. For those without investment lending, please feel free to forward this article to investors you know who will be interested in the changes, given there are some tight deadlines below from two major banks. These announcements are specific to my current lender panel so will not represent all lenders in Australia. Some lenders are increasing on interest only regardless of whether they are investment loans or not, and some are restricting their maximum loan to value ratio heavily, this is mostly in relation to investment loans but some have also reduced owner occupied loan LVR’s.

AMP

No longer accepting investment lending including self managed super fund lending. Variable rates on existing investment loans are to increase by 0.47% effective 7th September 2015

ANZ

Variable rates for investment loans are increasing by 0.27% as of the 10th of August. Fixed rates for investment lending have already increased by up to 0.30% across the various terms on offer.

Commonwealth Bank
Variable rates for new and existing investment home loans will increase by 0.27% effective Monday 10th August 2015. Fixed Rates all increased between 0.10% and 0.40% across terms for investment loans as of today

Bankwest

Super Start Home Loans reduced to 4.09% yet investment loans increased to 4.39% across this product range effective 28th July

ING

All investment lending is capped at a maximum of 80%

Owner occupied refinance loans capped at 80%

Macquarie

Fixed and Variable rates increased today by 0.27% for investment loans

NAB

Variable rates increased by 0.29% as of the 10th August for all interest only loans, regardless of whether they are investment or owner occupied loans.

Interest only fixed rates for owner occupied and investment will increase by 0.29% on the 10th August. It is uncommon to have notice so there is still time to ring your bank and lock in the current fixed rates.

Why are these changes happening?

APRA, under advice from the Reserve Bank, are monitoring banks lending practices and requiring that they limit their investment lending growth to 10%. The banks are therefore adjusting the attractiveness of their investment lending in order to slow growth. As a means to balance their lending portfolios they will be more aggressive in obtaining larger shares of owner occupied lending markets. As a result you can expect to see better discounts for owner occupied loans, and higher margins for investment lending. We are already beginning to see some refinance campaigns announced for owner occupiers, enticing borrowers to leave their current lender and move their borrowings over. This typically attracts sub 80% lends as nobody with LMI fees wishes to move and pay again, so this will be a popular strategy for banks and lenders in balancing their owner occupied vs investment books, whilst bolstering capital holdings and lending growth whilst still throttling the investment growth.

Other recent changes

All major banks have adjusted their loan to value ratios for investment lending. In many cases, you must now have larger deposits for investment loans, in nearly all cases you will require 10% plus costs, unless you have a very strong equity position in other property. Many smaller lenders and banks were already in this position due to earlier targeting by APRA to balance their investment lending growth or hold more capital.

Some lenders, such as Bankwest, St George, and ING will restrict investment lending to only 80% already. These changes have been occurring over the past months.

Some lenders are now also adding up to 20%-25% buffers on investment loan repayments, and/or no longer including the negative gearing benefits for borrowing capacity. Nearly all lenders are now assessing your new home loans at nearly 3% above your actual repayment also. Further to this, the housing expenditure measure (which is an industry measure for the cost of living for each household, adult and child) has been revised up a number of times, so this will drive affordability down for new loans. Overall, borrowing capacities are being affected. So it is important to obtain verifiable employment sources, be consistent in your incomes, and at all times, talk to your brokers about how to improve your borrowing power if required. 

What is an offset account?

An offset account is a separate account to your home loan, which is linked in the banks computer systems, so that the balance held in the offset account, is daily, offset against the interest accruing on your home loan. For example, if you set $10,000 into your home loan offset account for a month, on a loan of 6.90% interest, you would save around $57 interest for that month. The effect of placing this amount directly into the redraw account of the loan is exactly the same (for a variable loan) interest  savings.

Why use an offset and not redraw

100% offset accounts are normally easier to access, and can be run as transaction accounts for your income, bills, and other needs. Some banks offer unlimited offset accounts where you can run lots of offset accounts against the same home loan. Offset accounts also help you to quarantine the extra repayments. Further to this, they may offer you savings in future should you decide to turn an owner occupied home loan into an investment, read more on this here.

Why do offsets and fixed rates not mix

The banks do not have functionality to offer offset accounts on fixed rates. This is largely because fixed rates are bought at set wholesale prices for and paid for in advance. Any offset made against this would be a loss by the bank and therefore is not a financially viable product for the banks. 

Why not just put my money into a savings account or term deposit and earn interest?

When you 'save' money in terms of less interest, the tax office doesn't ask for a slice of your savings. However, the moment you put money into an interest bearing account, you will need to declare this in your tax return and are likely pay tax on it at your top marginal tax rate. For many this is 32c in the dollar, so your savings are quickly eroded by the tax man.


How do I get an offset account

It's tax time so in order to get ready for lodging your return we have a handy guide to assist you with getting your documents ready. Many of your financial and services providers will send you end of year statements so simply file them all as they come in. For accounts you can easily access summaries online for end of financial year fees and interest charges, for both interest paid and interest earned.


INCOME DOCUMENTS
Group certificate / Payment Summaries from employers
Lump sum / Termination Payment Summaries
Government payment statements
Interest income statements for savings accounts etc.
Dividend statements
Annual statements for managed funds income
Rental property statements
Business income reports
Foreign Income
Capital Gains records (Contracts of sale for goods sold)

EXPENSE DOCUMENTS
Work Expenses and receipts
Depreciation reports on properties
Donations to charities receipts
Income protection statements
Receipts for works, repairs, or purchases for rental properties
Interest and fees charges on any investment or business loans
Health Insurance statement

OTHER
Tax File Number
Identification & Medicare Number
BSB and Account number for your refund

Switching your loan is a great way to make changes to your financial security, your budget, and your overall goals. What is switching? It's the buzzword the banks use to describe the 'process' of changing your loan rate, product, or features during the course of the loan. Below are some real life switching examples that we have assisted people with


Switching from Principle & Interest, to Interest Only
Many of our clients upgrade their housing to a new home but keep their existing as an investment. In this scenario, we often, with the advice of an accountant, opt to switch the home loan into an interest only feature for between 1 to 5 years. This is the most common reason to switch. People experiencing short term cash flow issues may opt to switch their home loan into interest only for a year until the budget pressures are off. This might happen when you have a new child and maternity/paternity leave is taken, for instance.

Switching from Interest Only, to Principle & Interest
Sometimes you may wish to re-align your financial goals. If times are good and cash flow is strong and steady, why not start to hammer some of the principle off your investment loans? We have a great range of calculators here on our website that will help you work out what repayments will meet your target. Click here for our calculators.

Switching from Standard Variable to Fixed 
Thinking of locking your interest rate in? Most banks have a 1,2,3,4 and 5 year fixed option to help you and your family budget for repayments. With fixed rates being at record lows, many of our clients are considering a switch to fixed. If you're not sure you can always opt to split your loan into part fixed and part variable so as to hedge your bets a little both ways.

Switching from Standard Variable to a Basic Home Loan
Loans that are a little older tend to be on less competitive rates, when people ring us we sometimes simply discuss the option to switch into their current lenders basic home loan which will mean a cheaper rate, but less features. We can discuss whether or not there is a benefit and what features are important before you opt to do so.

Switching a line of credit into a standard home loan
So many people have lines of credit that are maxed out and no longer being paid off, perhaps it's time to switch to an amortising home loan that you can pay down over the next 25-30 years. They tend to hang around indefinitely if you don't.

It is not always necessary to refinance for a better option. If you're not sure about your home loan, feel free to contact us to have a review of your current rate, product options and to obtain assistance in switching. 

Australia is a big country and Australians love land. For so many of us, to own land, have land, harvest and use land is at the core of our sense of self. Not to mention, the sheer enjoyment of owning your space AND the views. 

Having worked as a mortgage broker in both Port Douglas and Bowral for ten years; 'acreage', 'rural zoning', 'dwelling entitlements' are words I hear and deal with regularly. Some lenders simply won't finance over five acres, or secure against rural zoning, so we really need to know our lenders policies. A recent case really highlighted this, and here is how we overcame it....
The land

An agent came to me experiencing difficulty in country NSW with a listing that wouldn't exchange due to the buyers having problems with lenders. The block was located outside part of a new development that was not close to any towns, so comparable sales were restricted. The clients had experienced difficulty in financing the blocks with not just one, but two local lenders, both of which had ended up declining the finance once the valuer sent their report in. This was not surprising, the zoning was rural, there were limited comparable sales, and the block was well over five acres. A trifecta of issues for most lenders, however, not insurmountable with the right lender and loan structure. 

The clients

The clients met with me to discuss a strategy. The blocks were clearly important to them and supported a dream to move and reside there happily, and  away from suburbia. We discussed the various hurdles lenders have and agreed on a strategy that met with their budget, covered all the fees, and fit well with cash flow. It was important that we took the equity out of their own home, so that the block could be purchased at 80% loan to value ratio or less, rather than financing it the other way around as many would do (load the debt more heavily against the property that was not their home). The strategy thus far was to:

1) Use a lender that was comfortable with large acreage's and rural zoning
2) Secure the debt at 80% LVR by using additional equity from the clients home
3) Finance some equipment required within the clients 'dream outcome', with equipment finance rather than equity so as to keep the LVR at 80%, rates low, fees low, and avoid discomfort from a mortgage insurer

Things got a little trickier...

In getting the application ready, and researching options, I uncovered that the blocks size would not allow for a dwelling entitlement within the local council's development control plans. Even a lender that accepts rural and larger blocks would have issues with this! If the clients wanted to truly retire on the land later, they were running the risk of council not allowing the land to be occupied or built on. I rang the agent immediately, and explained the situation. It's important that all parties work towards a common goal, and this was an agent I trusted. The agent said straight away if the bank wanted more land the vendors could could sell more land by adding more titles and revising the price. More land was added sufficient to meet the acreage required for council to grant dwelling entitlements. The clients, after considering that they wanted to legally occupy the land later, opted to take the offer. On the contract, we now had three titles for sale, all adjoining blocks, that once combined would meet the minimum size requirements of forty hectares for a dwelling entitlement. Upon ordering a valuation, I sent notes to the valuer to have this explicitly written in to the bank valuers comments. This did take extra time, but as both the clients and vendors agent understood, this was a necessary part of ensuring that we obtained approval.

Dealing with credit

Of course, once credit got the valuation and contract they questioned it, so we discussed providing the bank with comfort, by obtaining a letter from council explaining that the consolidation of the lots to one total area would give it dwelling entitlement. The council's town planners charged a small fee for this service and provided it in a couple of days. From there, we got stuck in the valuations department, as valuations weren't sure what to do with the comments. I rang the head of credit, and discussed the predicament. He requested a letter of undertaking from the clients that they would combine the lots through the Land Property Information office within twelve months, and a full approval was granted.

Of course this is not something that happens every day, but each property, or client has their own personal hurdles and simple negotiation is all that is often required to bring all the parties together.

Record low interest rates and an ever growing population have pushed new home approvals to an all time High. Approvals for construction of new homes rose 2.8% in March the highest monthly reading since 1983. Housing trends are underpinning the type of growth with the number of multi-unit dwellings approved in March overtaking free-standing houses for the first time.  St George cheif economist Hans Kunnen says there has been a big move in Australians wanting to live in apartments, townhouses and semi-detached houses. He also states that this explains relatively wekaer price growth of late among units as compared to houses. HIA economist Shane Garrett said that low interest rates and  a strong population were driving the home building boom.  With a $15,000 great start grant still available to first home buyers and stamp duty discounts on land for anyone intending to build now we have certainly seen the trend at Wilson Financial.

Source - www.thebull.com.au 

Does the cost to insure yourself prevent you from protecting your greatest asset? 

Insurers have caught onto the rising pressure of living expenses, so they now offer new funding methods that can remove the burden of insurance from your monthly pay packet.  For many with tight budgets, where one adult has temporarily stopped working to raise children, adequate Insurance is seen as a superfluous item and never taken out, even when large debts are taken on to finance the family home. This is a big risk for a family, so there are alternate ways to fund protection that you should explore.

What’s the answer? How do we afford insurance?

It is often said that the only constant in the Financial Services Industry  and even life, is change. Due to constantly evolving government legislation, client requirements and industry developments, Insurance and Investment products are always evolving. To maintain competitiveness, some insurers are allowing insurance premiums to be fully or partially funded through superannuation, thus allowing you to become insured, but removing a large part of the out of pocket expense. Funding Insurance premiums through Superannuation has been an option for quite some time, but often clients would end up sacrificing the strength of the policy in order to avoid costs.

Are there any catches? 

In some instances, a policy fully funded by super can ‘weaken’ your policy because they don’t offer the same features as policies outside of Super, or there is a conflict with the rules and guidelines of the Superannuation environment.  For example; you are unable to acquire own occupation total and permanent disability cover or, agreed value income protection exclusively through super. What this means is, if you were to be totally and permanently disabled but only had 'any' occupation cover, your TPD may not pay if you are still able to do another job type.

How does partial payments work?

Given that you have already paid tax at your marginal rate on the money that’s in your wallet, people want to spend as little as possible on Insurance premiums. This flexi-linked fee structure allows clients to split many different types of Insurance, including Income Protection.  A financial planner can review your specific scenario and provide formal advice on how best to structure a split paid policy premium, if that is determined to be the best option for you.

When doesn't it work?

This will depend on the level of Super Contributions being made, and the recommended level of cover that you need.  In the end Superannuation is a means of funding our own retirement, and should be used as such. A Financial Planners role is to provide recommendations so that you can benefit from the Financial Products available, and understand the sometimes complex frameworks of Superannuation and Insurance.

For any Insurance queries, or to organise a review of your Superannuation, Investments and Insurance please contact me on [email protected]

THE AUSTRALIAN

APRIL 20, 2015 12:00AM

Shane Rodgers had a lot to learn aged 25.

If we were able to go back in time and talk to our 25-year-old selves, what advice would we give? Just in case a time machine ever comes along, this is the career advice I would give my 25-year-old self.

1. A career is a marathon, not a sprint: Chill. When we are younger we tend to be impatient. As you get older you realise there is no real rush. Life, and the careers we pursue to fill it and pay the bills, needs to be approached on a long-term basis. If you sprint, you will wear out or start to resent work that you previously enjoyed. Allow yourself time to breathe and grow. Things will come if you work hard and allow yourself time to improve. Always rushing leaves you empty, and tired. It is fine to give yourself permission to take some time in the slow lane. You will find yourself seeing things on the journey that you didn’t realise were there.

2. Success comes from repetition : I remember hairdressing legend Stefan Ackerie telling me this in 2003. I had never really thought about it before. A few years later Malcolm Gladwell’s brilliant book Outliers was published, promoting the idea that you needed to spend 10,000 hours on something to become truly expert at it. The lesson here is get good at things before you try to move to the next thing. Genuine expertise belongs to an elite few. They seldom have superpowers. They have endurance, patience and take a long-term view. They also love what they do. If you find that, don’t let it go.

3. Get your priorities right: It is well established that nobody laments on their death bed that they didn’t spend enough time at the ­office. Yet still we let contrived circumstances and trivial issues keep us from important events such as school sport days and kids getting badges for picking up rubbish. I can remember every sport day and certificate presentation I missed. I can’t remember any of the reasons I missed them. Over the long haul, it doesn’t matter if you have a few years when your career is in canter mode while you prioritise young children. I was watching some video of my kids when they were little and I realised, again, that the little people in that video don’t exist in that form any more. They have grown into pride-worthy adults but the tiny people with wonder in their eyes were just passing through.

4. Always act like you are 35: A recruiter gave me this advice some years ago. It is inspired. What she meant was, when you are young in the workplace, don’t act as a novice. If you are smart and competent, step up and do what you are capable of in a mature way. Similarly, when you are older, don’t act like it. Approach your day with youthful energy. To quote a Frank Sinatra song: “You’re 35 and it’s a very good year.”

5. Management is about people, not things: It is easy to fall into the trap of believing that all people are equal, behave the same and have a generic capacity to perform. Humans are simply not made like that. Business guru Jack Welch says the workforce consists of 20 per cent of people who are high performers, 10 per cent that you should get rid of and 70 per cent who do OK. The issue is the 70 per cent. Most managers want everyone in the 20 per cent. We need to be careful not to believe that the 70 per cent are underperformers. Sometimes we need to celebrate the competence of the masses, not the superpowers of the elite. As managers, we don’t just manage but empower people and make the best use of whatever they bring to the table.

6. Genuinely listen to others: It is easy to fall into the trap of thinking we have all the answers as individuals. We don’t. As a group we are far more powerful. We need to genuinely collaborate and really listen to others. And we need to ask our own people first.

7. Never work for horrible bastards: Life is way too short to tolerate ­really bad bosses. If you find yourself working for one, unless you are desperate or starving, start looking for a new job. Immediately. Then sack the bad boss. By leaving.

8. Recognise that staff are people with ­finite emotional capacity: It is clear to me now that humans have a limited emotional capacity. If there is something challenging happening in their personal lives, they have finite capacity left to deal with work. In nearly 100 per cent of cases I dealt with of people suddenly underperforming in the office, it has nothing to do with work. When good people have problems, managers and companies need to carry them. This should be a personal mission. If we carry people when they most need it, we become a stronger community. A reinvigorated broken employee is a corporation’s most powerful force.

9. Don’t just network with people your own age: Beware the whiz kid syndrome. Smart, young people have a habit of forming communities of other smart young people. In fact networking should be about meeting useful mentors and career champions who can open doors and fast track careers. Similarly, older, successful people shouldn’t just sit in musty clubs talking about the 1970s. They should seek out smart, young people who can shake them out of their comfort zone.

10. Take the time to understand what your business does: I love the story of President John F. Kennedy’s visit to NASA during which he asked a cleaner what his job was. The cleaner replied that he sent rockets to the moon. All of us should feel part of what our organisations actually do. We should be part of the big picture and feel connected with the true objectives of our workplace.

11. Work in an office where you have friends: You will spend a lot of time at work. You should work with people you like. I used to be a bit sceptical about a question in employment engagement surveys asking people if they had a “best friend” at work. I realise now that work is much better if you are among friends. The happiest people are those who do things they are passionate about with people they really like.

12. Never sacrifice personal ethics for a work reason: Crucial to workplace happiness is value alignment. If you work somewhere that compromises your personal ethics and values, get out of there as quickly as you can. Good people will be unnerved by things that don’t feel right. If it doesn’t feel right, it probably isn’t. Bad things only manifest when good people don’t take a stand.

13. Recognise that failure is learning: As bizarre as it might sound, failing is not failure. Researchers recognise that failure is just part of a process to eliminate unsuccessful options. Thomas Edison articulated this best: “I have not failed. I have just found 10,000 ways that don’t work.” If we fear failure we tend to take a minimalist approach to our jobs. Take some risks. Sometimes failing spectacularly is the best evidence that we are alive, human and serious about aspiring to the extraordinary. There is no value in being ordinary when you have the capacity to be remarkable.

Any steps you can take to pay off your mortgage sooner are well worth the effort and time involved.

If you are living in your property (as an owner-occupier), the interest paid on your mortgage is not tax deductible. Mortgage repayments are made from your after-tax income. Any money you can save on your home loan is therefore even more valuable. Thinking about this in another way, generally the interest you save yourself on your home loan is worth more than the same amount earned from an investment.

Low interest rates are good news for everyone with a mortgage. The reason being that low interest rates provide the perfect opportunity for home owners to get ahead on their home loans by making additional payments towards their mortgages.

The consequence of lower rates is lower repayments – making your mortgage more affordable and perhaps even meaning you will have money in reserve should interest rates increase. One fabulous thing you can do with the additional funds is put it straight back into your mortgage

Why Pay Extra?

Paying more than the minimum will help you pay off your mortgage faster because the extra repayments are going towards the principal of the loan rather than the interest. Not only will you pay off your mortgage sooner, you will also pay less over the life of your loan because you will reduce the interest charges.

Making extra repayments is even more important in the first five to eight years of your mortgage, according to the Australian Securities & Investments Commission (ASIC). As ASIC states on its Money Smart website, most of your payments in those first few years go towards paying off the interest, therefore any additional repayments can make a huge difference in shortening the life of your loan.

Low interest rates actually present us all with a wonderful opportunity to reduce our debts faster. If interest rates fall, your lender may give you the option to reduce your repayments. Try to resist the temptation! If you maintain your current level, you will reduce the amount outstanding on your mortgage, and pay if off sooner.

Please give us a call to discuss the benefits of this strategy further.

The residential property market is Australia’s single largest, and most valuable asset class with a total estimated value of $5.2 trillion as at January 2014 according to Core Logic.

Since the combined capital city housing market began its current growth phase in June 2012 values have increased significantly in Sydney (31.2%), with growth more moderate in Melbourne (17.6%), Darwin (17.5%) and Perth (15.5%) and much slower elsewhere. Combined capital city home values have increased by 8.5% over the 12 months to November 2014 and by 7.0% over the first 11 months of 2014. The annual rate of home value growth peaked in April 2014 at 11.5% across the combined capitals, slowing to 8.5% in November. This trend has been reflected across all capital cities except for Hobart.

Core Logic RP Data anticipates that the rate of capital growth, particularly in Sydney and Melbourne will continue to moderate over the coming year. logic anticipates that values will continue to rise until such time that interest rates increase.

Households

Labour force data for January 2014 recorded the national unemployment rate at 6.0% which was the highest national unemployment rate since July 2003. In November 2014 it was steady at 6.20%.

Further to this, household income growth, consumer and business confidences are all low off the back of the mining sector slow down.

Loss making sales and Regional areas

An interesting by product of recent hikes in property values in major cities is hypothesis that other markets will improve as investors and those priced out of the expensive markets start to look for alternatives. Discounting in regional areas is lessening.

Over 12 months to January 2014, the most expensive 25 per cent of capital city suburbs recorded the greatest increase in home values, while the most affordable 25 per cent of suburbs recorded the lowest rate of value growth.

Despite realised losses on residential property declining, across the country homes that have been owned for between three and five years were most likely to experience a loss. Regional markets continue to be the most likely areas to record loss making sales.

Loss Making Home resales for the Dec 2013 QTR

*** UPDATE SEPT 2016*** Please note this process has changed. We recommend using a credit repair agency. In the comments, you will see that some people had success with a firm called MTA partners, and further we have had clients have success with We Fix Credit www.wefixcredit.com.au - we however take no responsibility for the outcomes you experience with these firms and we are not a credit repair agency. We wish you the best and please read on for some basics ! Best wishes, Liz

There are all sorts of bad things that companies or people can do to affect your credit file, one of these is a court judgement. This is when someone has taken you to court, normally the local court for a minor claim, and have won a case against you. If they have you will have a 'court judgement' listed on your credit file which is very bad for your credit. It is unlikely mainstream lenders will lend to you if the court judgement is listed. Particularly if it is more then say $100. I have had some success with assisting clients to remove court judgement from their file so here are the steps to go through.

Step 1. You absolutely must settle the debt - this means pay it out with the plaintiff. Contact them first and suggest that you are now willing to pay out the debt, if they will co-operate and sign a notice of discontinuance. While you haven't paid them yet, is the time to negotiate on this, don't pay and then ask them to sign something to assist! They may still be steaming from the fact that they had to take you to court over it.
Step 2. Once you have agreed to pay, and the plaintiff has agreed to sign on receipt of payment, Complete one of these forms with the assistance of the local court, or a solicitor http://www.ucprforms.justice.nsw.gov.au/ Form 33 "Notice of discontinuance"
Step 3. Once paid, have the plaintiff sign, and yourself sign, and any legal representatives still working on the case sign, then go to the local court where the judgement was filed and lodge the form. Hold a copy of the form on file in case it is lost.
Step 4. Wait approximately 2 weeks for it to be processed then order a new copy of your credit file from VEDA. You can obtain it FREE by using this link

If you find the court judgement still shows you will need to check with the local court that it was processed, if it was, you will you need to check with VEDA as they may have a back log.

It's a bit of a process but once removed you are now clear to apply for credit (assuming you have no other credit marks on your file!). Good luck!

Positive Credit Scoring

A number of recent changes to Australian ‘Privacy Legislation’ are in direct relation to Comprehensive Credit Reporting – better known as Positive Credit Scoring. In this article we take a look at the significance of the changes and how they affect us all.

In the most simple terms Positive Credit Scoring is a complex mathematical algorithm designed to assess an individuals finance application relative to their own personal ‘financial score card’. A comprehensive compilation of historical data is used to create each of our ‘credit scores’.

Most lenders will now use Positive Credit Scoring to assess applications for finance. Information provided in an individuals credit report may have an impact on their credit score. Lenders will now be able to compare information in your credit report with the information provided in finance applications. As a result – full disclosure is even more important than ever before.

Anyone (including lenders) can now access a copy of your credit report, enabling them to compare in detail the information you provide with the details on the report.

Comprehensive Credit Reporting

Previously in Australia the Credit Reporting Agencies (such as: Veda and Dunn & Bradstreet) recorded limited detail on borrowings, company directorships, etc, and detailed any defaults or judgements. It was useful to see if someone was potentially a bad credit risk (Negative Credit Reporting), however was not really designed to identify ‘good’ credit risks.

With Comprehensive Credit Reporting, more information is gathered and then analysed to give you a score and ranking. Your score is calculated based on the information held in your credit report at a given point in time. Your score is dynamic and predicts the likelihood of an adverse event, like a default, being recorded on a credit report within the next 12 months.

Your score indicates how you compare to other credit-active Australians in the credit-reporting database. Lenders are likely to use this information as part of their credit assessment process; however, lenders will also use their own criteria and policies when assessing an application, not just your credit score.

Generating Your Credit Score

Day to day actions can have a marked impact on your overall credit score. It’s important to consider some of these more important factors and how they can affect your credit position.

 1. Personal Information – certain personal information is taken into account when creating your credit score. Age, length of time employed, time at your current residential address among them – these factors are used to determine risk.

2. Type of credit provider - there may be varying levels of risk associated with approaching a bank, store finance provider, hire purchase and utility companies for credit. Research suggests that there is different levels of risk associated with lenders in particular industries – for example, non-traditional lenders may pose a different level of risk to that of a recognised bank.

3. Size and Type of Credit Sought – Credit limits you may have applied for in the past may have an impact on your credit score. Credit cards, personal loans, mortgages and store based finance options hold different levels of risk.

4. Number of Credit Enquiries – Every application or enquiry you make is added to your credit report, including mortgages, loans and utilities applications. Shopping around for credit may impact negatively on your credit score in a relatively short space of time. The simple process of seeking alternate options can impact greatly on your credit score.

5. Age of Your Credit Report – A relatively new credit file may show a different level of risk to a more established file.

6. Defaults and Court Writs – These can be an indicator of increased risk and negatively impact on your credit score. Files without such judgements can have the opposite effect and generate a more positive score. Until now, many late payments of accounts simply never made it to your personal credit score, this is no longer the case. Every time you default by 5 days or more, your credit file is given a black mark and your credit rating is downgraded.

7. Commercial Address and Title – The length of time you have operated from the same business address is a measure of stability and may have a positive impact on your credit score. If you’re a proprietor or director of a company it’s important to understand the commercial segments of your credit report.

Understanding Your Credit Score

An individuals credit score is provided as both a number and percentage position in relation to other credit active Australians. Scores are reviewed regularly and updated. They may also be adjusted by other factors such as population and general economic changes.

To provide you with a score relative to the rest of the population a ‘risk grade’ is used:

·         Below Average (Lowest 20%)

·         Average (21% to 40%)

·         Good (41% to 60%)

·         Very Good (61% to 80%)

·         Excellent (81% to 100%)

There are many variables and factors taken into account to produce a ‘credit score’. A ‘good’ score is a relative term as it can only be determined by how the rest of the credit active population is fairing. Where you sit on a percentile basis is probably more important than your actual score at any given point in time as your status fluctuates on the back of many influencing factors.

Should a specific event effect and downgrade your score it will likely self-correct within a 12 to 18 month period – providing you maintain stable employment, limit your applications for finance and continue to reside at the same address.

What Your Lender Now Knows

Here are just a few examples of what the banks will know following the changes to credit scoring and privacy legislation.

·         Whether repayments have been made on time over a two-year period.

·         If a repayment of over $150 is more than 60 days late, it will be listed as a default.

·         The limit on the credit cards for which you have applied.

·         The type of card for which you have applied.

·         The date you opened a credit account, the type of account, and when it was closed.

·         If, because of a default, someone has entered into a new varied arrangement for repayments.

What You Should & Shouldn’t Do!

Here are a few tips to maintain a good credit rating:

·         Close any credit facilities you don’t need.

·         Set up automatic debits to pay your credit card and loans on time.

·         Contact your lender to renegotiate your repayment terms if necessary.

·         Check your credit file regularly.

·         Don’t pay a debt more than five days late.

·         Don’t shop around for credit cards and store cards when you don’t need them.

 The significance of the changes to legislation and availability of personal information to lenders is massive. Some lenders will review your credit score to decide whether to even consider an application. Others will take your credit score into consideration but make an assessment on the overall merits and circumstances.

What makes it even more confusing is that some lenders do not credit score but the mortgage insurer that they use does, so even though a loan can be approved by a lender, it can be declined by a mortgage insurer.

Understanding who does what in relation to your personal credit score is important but not always possible for the average person. Using a competent and experienced broker will give you an advantage. If you have questions about credit scoring or finance in general, contact us today – we are always happy to assist.

You will find more information and access to your personal credit reports from both Veda and Dun and Bradstreet.

2014 Federal Budget – The Winners & Losers

Here’s a look at those who gain and those who are likely to feel the pain from this years federal budget. We highlight some of the more significant changes effecting every day Australians in this months issue.

Who Are The Winners?

Small to Medium Business

Cut to the company tax rate of 1.5 per cent from July 1 2015 to 28.5% for companies earning less than $5,000,000 in taxable income.

Older Job Seekers

A new incentive to encourage business to employ older Australians (aged 50+) who were previously on government benefits for at least six months. Employers will receive up to $10,000 over 24 months in Government assistance.

Mothers

The Paid Parental Leave Scheme will pay new mothers up to $50,000.

Who Are The Losers?

Pensioners

From 1 July 2025, the age pension qualifying age will start rising by six months every two years, from 67 years to 70 years by 1 July 2035.

Age Pension to be increased with CPI rather than the current system linked to wage growth.

Mature Age Worker Offset will be abolished from 1 July 2014 rather than being phased out.

It will be tougher to qualify for the Commonwealth Seniors Health Card from 1 July 2014 and the Seniors Supplement payment will be abolished.

Changes to the deeming rate thresholds from September 2017, meaning more people will be subject to the Centrelink income test.

Families

From 1 July 2015, the Government will reduce the Family Tax Benefit Part B. Primary earner income reduced from $150,000 to $100,000 per annum.

Family Tax Benefit B to be limited to families whose youngest child is younger than six years of age. As a transitional arrangement, families with a youngest child aged six and over on 30 June 2015 will remain eligible for FTB Part B for two years.

From 1 July 2015, bulk billed visits to General Practitioners, blood tests and X-Rays will cost the average tax payer $7 per consult.

Students

The interest rate for HECS and HELP assistance will no longer be set at CPI but instead at the 10 year bond rate (currently around 4%).

The minimum wage at which the debt will need to be repaid will also start earlier from 1 July 2016.

Deregulating of university education fees likely to see education costs increase.

Young Unemployed

From 1 January 2015, those claiming Newstart Allowance and Youth Allowance will serve a 6-month waiting period.

Increase to the eligibility age for Newstart Allowance and Sickness Allowance from 22 to 24 years of age from 1 January 2015.

 High Income Earners

Temporary budget repair levy – for those earing $180,000 per annum or more, you will get slugged a 2% levy on the amount earned over $180,000. Top marginal tax rate effectively becomes 49% (including Medicare levy).

Fringe benefits tax will increase from 47% to 49% from 1 April 2015 until 31 March 2017. If you are currently packaging a car this may impact you.

Conclusion…

In a recent poll conducted by the Sydney Morning Herald the following results were published – 24% agreed the budget was “Tough but fair”; a whopping 70% decided the budget is “Too hard on the vulnerable” and only 6% chose to abstain from comment. (*)

All eyes turn now toward the Senate to see how much of the Abbott/Hockey budget will be accepted.

(*)  Source – Sydney Morning Herald Online – May 13, 2014.

Concerned about loan payments on a big bill month, worried about going on maternity leave, thinking you would like your payments seasonally? Subject to credit approval with lender,  there are a number of other structured repayment options which can be built into the repayment arrangement on a consumer loan /chattel Mortgage / HP / Lease;  Some structured loan examples –

·         Drivers/Anniversary package – Nil repayment on the vehicle anniversary of the purchase for the duration of the loan (to assist with registration and servicing costs)

·         Family Package - An extra $50 per week is added to the repayment amount for the first 9 months, followed by significantly reduced payments for 12 months to accommodate maternity leave, then returning to the standard repayment amount for the remainder of the loan.

·         Equity Package - Designed to increase the repayment commitment in the first two years of the loan to help address potential minus equity. The extra repayment amount can be customised for the first and second 12 month periods, reducing to the standard amount in the third 12 month period, followed by lower repayments for the remainder of the loan.

·         Tradie’s Package - Half repayment every January and February for the duration of the loan to accommodate the anticipated Tradespersons fluctuating cash flow over the Christmas / New Year period.

·         GST – GST component of an equipment purchase is built into the (say) 4th month of a contract as a repayment after it has been claimed back in their BAS;

·         Seasonal Payments – Common when lending for Agri businesses and those effected by seasonal conditions (such as the ‘Wet Season’ in the tropics) where payment/s are structured to coincide with receipt of income (e.g. one annual payment due when Wool Cheque is received). .

·         High Start Payments – Payments can be accelerated in (say) the first 12 months to coincide with increased income

·         Low start Payments - Payments can be reduced to be increased at a later date to coincide with a known event that will allow higher payments to be met at that time, not winning the lottery but, say, another loan being repaid or a property settlement being finalised. 

Capital city dwelling values posted a 2.3% jump over the month of March 2014 with every capital city recording a month-on-month rise in dwelling values.

History tells us that very low interest rates can bring borrowers into the market, fueling demand and creating what is commonly referred to as a ‘Housing Bubble’.

This can be defined as “a rise in housing prices fuelled by demand, speculation and the belief that recent history is an infallible forecast of the future.”  Housing bubbles usually start with an increase in demand, in the face of limited supply that takes a relatively long period of time to replenish and increase.

Continued Growth In Housing Market

Melbourne posted the highest level of growth at 5.4 per cent over the quarter with Sydney and Hobart also recording a strong result in the March quarter with values up 4.4 per cent and 4.7 per cent respectively.

According to RP Data research director Tim Lawless, half of all Australia's capital cities are now posting record high dwelling values, with Sydney's housing market showing the most substantial increase beyond its previous market high.

"Sydney dwelling values are now 15.8 per cent higher than their previous peak, substantially more than Melbourne where dwelling values are 4.7 percent higher than their previous peak. Perth and Canberra values have risen to be 2.9 and 1.2 per cent higher than their previous high point, respectively," Mr Lawless said.

Properties Selling Quicker In Current Market

There are presently less houses for sale than the same time last year and they are selling in a relatively short period of time. 12 months ago properties remained on the market for an average of 70 days, this has reduced to 51 days in the current housing market.

Recently listed stock is up 18.8% but the total number of listings is trending 3.8% lower than the same time last year. This suggests there are a number of new properties available however, the increase in demand is seeing properties sell at breakneck pace reducing overall stock levels.

Based on today's RP Data Rismark results, dwelling values have risen by a cumulative 15.8% since the growth cycle commenced in June 2012. Mr Lawless noted that a majority of this growth has occurred since June last year.

Looking at the performance of the housing market across broad price segments, the premium market remains as the best performer. After posting a more substantial correction, dwelling values across the most expensive quarter of the market were up 7.2% over the past six months while the lower priced quarter of the market saw values rise by a lower 4.9% over the past six months.

Rental Yields Down Overall

Rental yields continued to taper over the month of March 2014, with the typical capital city house providing a gross yield of just 3.8% and units showing a higher 4.6% gross yield. 

According to Mr Lawless, gross rental yields have been falling since June 2013 when the pace of dwelling value growth picked up substantially. While capital city home values are up 12.5% since May last year, weekly rents have increased by just 1.8%.

With the growth in home values, senior research analyst with RP Data, Cameron Kusher advises “it is reasonable to expect a further deterioration of rental yields over the coming months, particularly in Sydney, Melbourne and to a lesser degree, Perth where value growth has been much stronger.”

(Source: rpdata.com)

 

Saving Money On Your Energy Bills
By adopting some simple smart energy-saving measures in your home you can reduce energy wastage and use energy wisely. You will save money and reduce greenhouse gas emissions while meeting your convenience and comfort needs.

Appliances And Lights
One of the most obvious ways to save energy in your home is to turn off the television and other appliances at the power point when they are not in use. Many appliances such as gaming consoles and televisions power down to a ‘stand-by’ mode and still draw power even when they are turned off at the switch or by the remote.

Additionally, always avoid leaving lights on that aren’t necessary. Your choice of light bulbs may also have an impact on your energy bill. Certain types require more electricity than others resulting in higher energy costs. Do a little research to find out which variety will work best for you.

Keep Your Cool
During the warm spring and summer months, it’s best to keep all appliances that give off a lot of heat away from the air-conditioner thermostat. If you don’t, your home may appear hotter than it actually is and the air-conditioner will have to work harder. This equates to more energy being used and more money spent on energy costs.

Thinking more about heat, it’s a good idea to avoid excessive use of the oven when it’s hot outside. During the warm weather months, the oven can quickly cause your home’s interior to heat up. This means the air conditioner will be working harder to cool your home’s interior, increasing your energy consumption and your power bills. One alternative you should consider is using the barbeque outside.

Shop Smart
Whether you have outdated appliances or are simply looking to furnish a new home, it’s a good idea to keep energy efficiency in mind when shopping for new appliances. Although energy-efficient models may be more expensive, they can save you money in the long run by cutting your energy costs every month.

Heating & Cooling
If you want to save a substantial amount of money, take a close look at your heating and cooling costs, these can make up over 50% of a family’s energy bill. When it comes to heating or cooling, make sure that the thermostat is adjusted at night. Consider leaving your air-conditioner off when the home is empty to avoid wasting energy. Make sure that filters for both heating and cooling units are replaced or cleaned regularly as this can have a large impact on efficiency.

Sun Sense & Solar
In the summer, leave your curtains and/or blinds closed to reduce heat from the sun entering your home, as this will cause your air-conditioner to work harder. In the warmer days in winter, open your curtains in order to get the most out of the sun’s warm rays.

Windows and glass are poor insulators and can have a large impact on your energy bills. Heat passes through them into your home just as easily as your cooled air-conditioned air dissipates out in summer.

Installing a solar panel and inverter system is well worth considering. Although the upfront cost may seem a huge expense, the reality is it will pay for itself in a relatively short time. Most systems, designed correctly for your home, will pay for themselves in as little as five years. Over the lifetime of the system (up to 25 years) your solar system can save you thousands.

Money Saving Energy Facts

• Washing clothes in cold rather than hot water could save you around $124 a year
  
  
• Getting rid of the second fridge could save you around $155 a year.
  
  
• Using a clothesline instead of an electric dryer once a week could save you around $69 a year.
  
  
• Switching off gaming consoles after use (at the wall) could save you up to $169 a year.
  
   
  
  

These amounts are an estimate only. Actual savings will vary depending on the age of your appliances, the size of your home, where you live in and the cost per unit of energy (kilowatts) you pay on your account.

Rising energy costs are in the news and prompting homeowners to take a fresh look at energy consumption. The good news is there's plenty you can do to lower your power bills and lots of resources online to help you save while maintaining the comfort levels you are used to.

 

 

 

The percentage of 18-34 year old women 87% (versus 79% of men) listing property - related ambitions as a top lifetime goal. 
.....According to the Westpac Home Ownership Report (from the Mortgage Professional Australia magazine)

Paige is our new car and equipment finance broker and offers some excellent advice about your car loans and the car market.

If you're thinking of buying a car, now is actually a very good time to do so. Dealerships are over supplied in general, it's costing them money each day to hold the vehicle and cars are in stock longer costing dealerships money. As a result dealers are ready to do deals and offload cars. Furthermore rates are historically low so repayments on your purchase are lower. In December 2013, KPMG warned of an oversupply threat in the new car market in 2014. As a result, more cars are selling leading to an oversupply of used cars. As a result, when your vehicle becomes a 'used car' at the end of it's loan term, it's value will drop faster than ever before.


SO BE CAREFUL of your residual...


The average client for a car loan will take out a five year term with a 30% residual, this is because the normally the value of the car will be 30% of it's original purchase price after 5 years. When the car owner goes to sell or trade-in, they can cover the cost of the residual without having to cough up any cash. Considering this potential oversupply, I'd advise you to be careful and cautious about how much you leave in the residual and be aware that this payout is due in five years time. Options to deal with this are:

• Put in a higher cash deposit when you purchase
• Some financiers allow above the minimum repayment required which will reduce your residual
• Always find out your residual dollar figure, not just the percentage
• Structure the term around how long you'll hold the car for
• Consider no or a lower residual
• We highly recommend you discuss the options with your accountant
   

Buying a home is likely to be the biggest purchase you will ever make, how often do you go out and spend say half a million dollars. Let's make no mistake, it's stressful, and it's a big deal.  What we're talking about today is how to help manage some of that process by being prepared before you start shopping by obtaining a pre-approval from the lender.

A pre-approval will determine exactly how much you can borrow and how much your repayments will be. Pre-approvals are far more accurate than mortgage calculators and other estimators as they take into account your entire financial position, credit score, credit report and circumstances. An online calculator cannot do this.

So what are some of the main advantages of a pre-approved loan?

Save Time

What if you find the house of your dreams? Next you go through the entire process of presenting an offer, having it accepted only to find the bank wont provide enough finance to complete the purchase. This can be both embarrassing and frustrating. Agents will soon start to pile pressure on you to exchange and you'll be frantically trying to find someone to approve you last minute.

Aside from that, it takes a lot of time for you to find that property and go through the processes only to discover you can’t afford it. If you have pre-approval you'll know exactly how much you can spend on your home. This saves you time since you can narrow down your choices immediately. It also saves a stack more time, as you already know the finance will be available and you don’t have to wait weeks for the bank to confirm their support or be searching for that document your lender wants. All the hard work is done upfront.

Save Money

Figuring out the most ideal lender, loan product, loan combination of fixed and split loans, researching how you feel about the options, possibly asking your parents or friends for their opinion on rates, this can all take time. We suggest doing this well before you are locking in a property purchase, the pre-approval stage is a great time to weigh up the options in depth and not rush this process. You'll feel less overwhelmed about the decisions you have to make. Once you're buying, you'll have building, pest, settlement time frames, and removalists to organize, so this is one less thing to think about.

No last minute hunts for paperwork

A pre-approved applicant is an organized applicant. I'm not going to lie here, if you want a lot of money from the bank you're going to have to provide enough paperwork and ID to confirm that you can and will repay them! Sometimes it feels like you need to provide blood and DNA samples. This takes time and can be stressful for applicants who are under pressure from the agent to exchange. We expressly advise NEVER to exchange prior to obtaining full approval. Therefore if you get all of this paperwork out of the way prior to shopping on the market for a property, you will find the whole process about 80% less stressful then if you went shopping for a home without pre-approval. On this one you just have to trust an experienced mortgage brokers advice, our pre-approved clients can't believe how much easier the process is. It's a time and pressure thing. We can also identify any unknown obstacles the bank uncovers well before you have the dream home in your sight.

There’s No Cost

It is important when you are speaking to your mortgage broker to know all the possible costs associated with any pre approval mortgage application. Pre approved mortgage finance, with most banks and lenders is fee free, and the pre approval lasts on average for 3 to 6 months, and is easy to update if your circumstances haven't changed.

If you have a pre-approval with a lender, this often enables us as your brokers to order a valuation upfront the minute you have 'offer and acceptance' on a property.

Instant Credibility

The real estate agents you negotiate with are likely to take your offer more seriously, knowing that you have pre-approved finance in place.

Strength To Negotiate

The pre-approved finance may give you more negotiating power on the property you want to purchase. With your finance pre approved, the seller may have more confidence in your offer and the associated finance application. As your broker we are happy to discuss the strength of your approval with agents, because if we can cite the approval conditions (with your express permission), and if the approval is only subject to valuation, this can be a strong draw card.

A pre approved mortgage application doesn’t always mean that your home loan will be approved, once you have found a property to buy. The bank or lender will still (generally speaking) need to value the property you have brought, and meet any other conditions.  Generally speaking though, if your home loan has been pre approved subject to valuation, you can move forward to full approval very quickly.

 

The Top 5 Home Insurance Mistakes To Avoid

Yesterday I came face to face with a man who had lost his home in the Blue Mountains bushfires. His insurance had been paid in a week, including things he wasn’t even aware of such as 12 months’ rent. If only this was the status quo. He was a banker with quite a senior role for one of the majors, so no surprises he was adequately insured, but it sure does make you think.

For homeowners struggling to make ends meet, there are plenty of ways to reduce costs, but experts warn insurance shouldn’t be the first place to be looking to cut corners.

We are all concerned with saving money and it is important to shop around when looking for insurance coverage. However some people are reducing their coverage or dropping important coverage plans altogether to try to save money and this can leave you dangerously underinsured in the event of a disaster.

With the holiday season upon us it’s important to ensure your insurance policy is adequate and up to date. Summer is fire season, and the wet season approaches for those in northern Australia. Be aware that you can’t obtain insurance last minute once a cyclone has been named or once a fire is at your doorstep.

Here’s a look at 5 of the top mistakes home owners make when it comes to their home insurance.

Insuring For Real Estate Value Only

Homeowners often mistakenly insure their property for its real estate value instead of the actual cost to rebuild. When real estate prices go down, that enables them to reduce the amount of insurance on their home and save some money. This is in effect creating a type of false economics.

You should make sure that you have enough coverage to completely rebuild your home and replace your belongings. A better way to save is to raise the excess on your policy. An increase from $500 to $1,000 could save as much as 25% on your premium payments in some cases.

Not Ensuring Complete Cover

Natural disasters can happen with little to no notice and can have devastating consequences. For instance, flood insurance is almost always a nominated addition to most policies.

One of the most common mistakes that homeowners make is assuming that their policy covers their home and belongings in the event of every potential risk – such as flood. Sadly, many people find out the hard way after a major storm that they didn’t have the coverage that they truly needed. You must check to see what natural catastrophes are common in your area and make sure you are adequately covered.

 

Choosing A Policy On Price Alone

Everyone likes a deal, so it’s not surprising that many homeowners will go with the cheapest policy they can find—but that could cost you in the long run.

Some of the lowest-priced polices only offer coverage at a depreciated amount and don’t give homeowners the best service if there is a loss. It’s almost always best practice to choose a provider that can cover the home adequately and will be easily accessible if something goes wrong.

You need to ensure that your policy covers all of your home and its belongings at the replacement cost, not at the actual cash value. For example, if your insurance policy only covers your roof at actual cash value and it’s damaged in a storm, the insurance company may only pay the depreciated amount for your roof. This means you may be stuck paying thousands of dollars out of your own pocket to replace your roof.

It’s also important to consider the fiscal health of the insurer to make sure the company is financially stable to cover any claims.

It is important to choose a company with competitive prices, but also one that is financially sound and provides good customer service.

Keep Your Policy Up-To-Date

Another easy mistake to make is not keeping careful and complete records of improvements, posses­sions, and other items in case your home is destroyed or damaged. Store a copy of these off site, if the worst happens you will have easy access to what you need to make a claim.

Failing to review and upgrade your homeowner’s policy annually could make a significant difference when it comes time to make a claim. With home values increasing, ask yourself - if you had a disaster would your policy cover it?

Read Your Policy Carefully

Homeowners’ insurance policies typically contain a large amount of fine print, legalese, and insurance company terminology. Read through the policy carefully and in full.

Keep a pad of paper nearby to jot down questions for a follow-up meeting with your insurer or broker. Insist they specifically define any legalese and insurance industry terms that you don't understand.

Some insurers require notice if you intend to be away from your property for a certain period of time. Read your policy carefully and be award of the intricacies that may affect you.

According to some insurance experts, when it comes to homeowners insurance, people often make mistakes that leave them underinsured and faced with massive debt if something goes wrong.

 

Navigating the insurance world to find the best coverage for your budget can be tough, but have the right coverage can prevent future financial headaches if disaster strikes.