Welcome to Arafura Finance Brokers
Arafura Finance Brokers are Northern Territory mortgage brokers with a difference. We are investors in the Territory. Our brokers source the most suitable home loan from the leading lenders.
Arafura Finance Brokers will find the most appropriate mortgage or home loan for your needs. If you’re an investor looking at the Northern Territory including Darwin, Arafura Finance Brokers can help.
If you would like to hear from an experienced property investor in the Northern Territory of Australia go to the contact page. Otherwise please feel free to explore the site.
Out and About
August 2010
The best weekend this dry
It must be weather; I have had enquiries about boat loans and bike loans. We have had perhaps the best weekend of the dry. If you are considering a purchase and don’t like the interest rate being quoted, let me know, perhaps we can help.
This newsletter I want to discuss buying off the plan. In my opinion not something that you do unless you have a contingency plan; some buffer in case things don’t add up 12 months in future.
But let us say you have done your homework and are going ahead with a purchase off the plan, you may want to consider using a deposit bond instead of going to your bank to get the bank guarantee. The deposit bond is available to investors who have existing property and can show that they can service the loan in the future.
A quick example:
$400k property off the plan. You need a $40k deposit.
If you borrow 10% off the bank that is a $40k loan, interest paid per month for the time it takes to build your property. If the loan is secured it is $40k of your equity that is tied up as security.
Or you use $40k from your savings, lost interest, cash tied up.
If you take a deposit bond you will pay up front a fees which depends on the time to build and there is no call on you existing equity. It may well be cheaper than raising finance. I know which we prefer.
Here is the plug:
This month’s Territory Property Investment seminar is on this Thursday and there are seats left. It would be great if you could drop me a line via email or phone that you are intending to attend.
Thursday 19th August 2010
7pm start
Darwin Trailer Boat Club
Fannie Bay
Book 0447 499 794
In the short term prices and sales may be stalling but some will say “it is time in the market not timing the market that counts”.
July 2010
Doomsayers view of housing
Australia has a love affair with debating house prices. The pessimists are led by Stephen Keen, Associate Professor in Economics and Finance at the University of Western Sydney. Keen has been convinced for years that Australian house prices are dangerously high - a bubble that is set to burst at some stage. His views were also mirrored by Jeremy Grantham who founded an investment company that is now worth $US120 billion in funds.
Australian house prices along with the United Kingdom are the two outstanding bubbles in the global economy.
Grantham argues the long run average of house prices relative to household income is 3.5% yet in Australian prices have leapt to nearly 7.5% of the household income. Eventually the ratio must revert to its mean, implying a major fall in house prices relative to income.
Keen meanwhile has tended to focus on another measure - real house prices that go back over 100 years. On a chart this measure appears to sky rocket in recent years. Most mainstream economists tend to dispute this scenario.
The Reserve Bank of Australia has done a lot of work on house prices and household debt. Its argument is that house prices have increased with relative income in recent decades because of the decline in inflation and interest rates. Which means that for a given level of income households can afford to take on bigger mortgages and pay more for houses.
The other factor is unfettered access to credit has meant that home affordability has become the new rationing device and we have pushed up house prices relative to income because we are prepared to devote more of the household budget to debt servicing than the previous financial regulation ever allowed.
Of course a willingness and ability to pay more for housing need not have pushed up the prices so much if there had been a greater supply response. Housing prices are likely to remain high rather than crash simply because demand is out stripping supply and Australia’s population growth is still growing at a rapid rate.
Housing pessimists need to explain where new supply will come from and/or why inflation and interest rates will surge.
Now to the adverts:
Territory Property Investment Seminar
Wednesday 21st July
7pm Start
Darwin Trailer Boat Club
Book 0447 499 794
And given that is tax time would you like a $50 Refund on your Tax Depreciation Schedule?
If you would like a depreciation schedule done for your investment property here is the form.
Property picks in Darwin and Palmerston
June 2010 - Looking for investment real estate in Darwin or Palmerston?
Here are some picks with the numbers to show how the top end adds up for investors.
- Block and Build - For the investor (and first home buyer) the best value may be to avoid stamp duties by buying a block of land and having a house built.
Download the fact sheet for Tropical Living at it’s best. The Heliconia from Tropical Lifestyle Homes.
- Catalina Apartments
We used Unit 10 as an example during the Territory Property Investment Seminar. If our example investor is earning $80k a year, using the supplied depreciation schedule we showed a holding cost of $74 p/w. Follow the link for the flyer.
The Catalina Apartments offer an enviable location and lifestyle and feature quality finishes throughout. Download the fact sheet for Catalina Apartments.
- Forrest Parade
There is now a call for affordable housing in the Territory and these two bedrooms units are the first off the rank.
2 bedroom, 2 bathroom Ground Level units with a yard. Download the fact sheet for Forrest Parade.
April 2010 - Why use a Mortgage Broker?
Many thanks to those of you who attended our recent seminar, I trust you found it useful. We are hoping that May 19th will be the next Territory Property Investment Seminar so keep an eye for an update. If you would like an in-house run through of what was covered please feel free to give me a ring or send an email. Day or evening is fine.
Why use a mortgage broker? What does a mortgage broker do?
Range of options is probably right up there as a good reason to use a broker. A real example plays out this way. Customer of the bank goes in to see the lending officer. Occasionally the advice they get is wait three months, or get a bigger deposit, or take out a credit card and come back in six months.
If the customer took this advice they most likely wouldn’t be buying the house they selected today and they probably wouldn’t be assessed at the interest rate they would be assessed at today.
So as a mortgage broker we understand your purchasing position and fit you to the correct lender, sometimes bringing forward or at least throwing light on the home buying process. We have access to over 35 lenders.
Mortgage brokers are free, it is the same loan as you get from the bank, the bank pays us to manage your loan process. Time is not an issue, a good broker can fit into your busy schedule, make a home visit when and where required.
If you are a property investor then having a mortgage broker who is a property investor makes a lot of sense, there is no shame in getting caught out by bank policy, but if the experience of another can save you time and money it may well be worth asking is your broker an investor? The same with the accountant and other members of your support team.
Contacts are handy also, if your looking for real estate interstate, or want to get a depreciation schedule, valuation or seeking a personal loan, a broker should be able to put you in touch with the good operators.
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March 2010 - Valuations
As promised I am going to cover off on valuations, the terms I use here are my own, there are technical descriptions for the steps involved which I don’t know or use in daily conversation.
The valuer is neither on your team or on the lenders’ team. They are independent professionals who provide a service as directed. This service can vary in cost from $150 to $600 for a simple residential valuation depending on who carries out the valuation and where.
Like a conveyancer they have a vital role in the property purchase. Unlike the conveyancer, you can’t do this yourself (not that you want to do the conveyancing yourself).
When a lender lends money they conduct due diligence on you and the property that is supporting the funds they are lending. The lender wants you to be successful in your investment and pay the loan interest. The requirement is that the subject property will sell in a reasonable time for enough funds to cover all costs of getting out of the property. They don’t want to own property directly and if things go wrong irretrievably they want to exit cleanly.
So the valuer is asked to establish the market value of the property, what the property would sell for. This is not what the person selling you the house has set as the asking price, although if all goes well it could well be.
In the case of where you are using property you already own as equity against the loan it is not what your existing property valued at 12 months ago plus the 8% capital growth your suburb has shown in that time, although again you could use that as a bit of a rough guide.
The valuer inspects your property and compares it against recent sales of comparable properties. This leads to some interesting points:
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If you own a reasonably new unit, your unit’s worth may be influenced by the last sales of units in your block, hopefully that sale was not a fire sale.
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An average house in an average street might be easier for you and I to compare with surrounding sales.
So in the nineteen years that we have been investing in property what have we learned about getting a valuation?
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The client can’t get it wrong, after all we just trigger the valuation, the price is determined by the valuer.
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Do as much homework as you can, because you can get a clanger. Get three comparable sold properties, print the internet advertisements out and place in a folder, ask the valuer if they want to see your research, they may not. If you engage the valuer in conversation point out why these three recent local sales assist in your own estimate of the properties worth.
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It’s a great moment when the valuer enters the property and you see them smile in appreciation, or even mumble, “nice kitchen”.
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If it is a rental property, tip your property manager off a few weeks ahead, get the long grass slashed off the curb side, maybe have the treasured Holden that is in parts on the back verandah covered in tarp.
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If it’s your own house, tidy up, as if you were having a short visit from someone you want to impress.
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It is very hard to argue with a valuation that a lender has paid for. We have disputed valuations but it is not a very satisfying process. Try this example:
We go to bank A to refinance our rural Victorian property, valuation comes back at $205K, great that’s what we thought. As the loan moves through Bank A has a policy change or should I say Bank A and we discover that Bank A has had a policy change, loan fails. We are persistent and now know to ask lender B if they still are interested in lending money for real estate in rural Victoria (sorry to sound a bit bitter, but you know).
Lender B does a valuation, $13k less than the valuation a week ago. Deal fails, send Lender B the valuation from Bank A and they just take the lower of the two. “Well it’s an old property, not that impressive” pardon me but isn’t rural Victoria full of old, not that impressive properties, they have a market value.
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The loan officer will try and discourage you from even submitting the loan, I get this a bit. If we put a loan application in the bank is going to value anyway, no cost to client, but a lot of work. So in the past we go to our regular Bank, our investment property is now worth $350k and we want to buy again, “You only had a value nine months ago, the market hasn’t moved”. We have done our research and we know the market has moved, insist, or
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Find out which valuer your intended lender uses and pay for a “valuation suitable for the lender to use”. When you find out the valuer and ring them to order the valuation they will try and talk you out of it, direct you back to the lender. I haven’t figured out why, you think they would want the business. Anyway we have done this and then handed the valuation in with the loan documents. It sure takes the guesswork out of the process.
Still reading? Ok at the moment we can get you a valuation for $150 (sorry but rural postcodes are not covered) anywhere in Australia. As I mentioned earlier, your lender may disregard it, but does help to establish the picture.
January 2010 - The statistics are in.
Well the real estate price statistics are in for 2009 and Darwin has again proved correct those who forecast that Darwin is at the top of the market. It seems the top of the market in Darwin continues on re creating itself (they do say all good things do have to come to an end, by the way).
To quote the Jan 2010 Residex newsletter: “Darwin, Melbourne and Sydney were the stand out success stories. However, Melbourne overall must take the ‘Guernsey’ with capital growth for the last six months of 12%, Sydney taking second place with 10.2% and the third Darwin with 8.5%.”
No one can predict the future, but in 23 years of living and investing in the Northern Territory we have seen an average of 8% growth in value in property here.
The last quarter of 2009 has seen some life coming back into our diversified portfolio. I doubt I would have hoped that a -2% growth over twelve months was a good thing, but the numbers were much worse mid last year for one of our interstate investment properties. 2009 was a tough year for investors, now, if only the drought would break.
There are a number of reasons to select a location, but eventually diversification comes into play, if you are interested in interstate property please let me know.
November 2009 - Strong growth in real estate values in Darwin.
We had a look at Wharf One today. There are 5 or 6 units that I can see in the newspaper for sale starting from mid 600k. There were a few people at the two units we looked at, the $650k make an offer was pretty small. The $830k unit again suffered from a lack of floor space but the view was excellent.
I wonder how people will take to the walk every day to get too and fro with shopping and so on. There was a current resident and she reckons the walkway to the city allows people to look into her unit, part of the fish bowl effect!
Any way the verdict on our team was, yes as an investment, but not our idea of a luxury unit. We spent some time with a Queenslander and I do get reminded that the quality of units in QLD is way over some of the finishes being offered in Darwin.
Wharf Two goes up for sale off the plan next week I hear.
We attended an auction in Leanyer/ Woodleigh Gardens a week back and the house, which is the same build as ours passed in at $616k after a bit of argy bargy between the auctioneers and one of the ‘bidding from around the side wall’ customers.
$616k is a strong price and augers well for home owners in the northern suburbs. The most recent growth numbers remain strong in Darwin, some of the best in the country, hard for first home buyers, difficult for investors, but good for owners.
Rental returns are 6%. There seems to be an anomaly in unit prices which show excellent growth but this might be a few expensive units skewing the numbers. Our experience is that the units (middle of the road) have not gone as well as houses over the last five or so years. It would be nice to see some capital gains kick in.
October 2009 - Mortgage Reduction
With NAB releasing it’s Homeside Homeplus product I am getting enquiries so I thought I’d run the comparison.
Clients who are interested in Mortgage Reduction look for:
- No monthly fees
- Low interest rates
- 100% offset
Most of the majors have a package that suits these requirements, typically these packages carry a $350 to $400 per year fee. This fee eliminates startup fees and ongoing fees. The offset account is treated differently but it is possible to get a fee free 100% offset account under this methods. I found a few lenders that meet this criteria.
So the choice comes down to interest rate.
The rate quoted on a $400,000 home loan at 80% or less LVR is around the 5.49% (comparison rate 5.61%) for most package discounts.
The new NAB rate on the same loan is 5.32% (comparison rate 5.48%). It gets better if you have a better LVR at 75% the rate is 5.22% (comparison rate 5.38%).
This represents a saving of $60 per month, if you seek mortgage reduction you just pay the extra into loan and the life of the loan gets shorter.
The NAB loans comes with a $10 per month fee, so the annual fee is less than half that of a package.
If you would like to know more let me know.
The comparison rate is calculated based on $150,000 over 25 years for a secured loan. All Comparison Rates are calculated on the basis of secured credit of $150,000 over a 25 year term. WARNING: This comparison rate is truly only for examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
September 2009 - Gladstone/Townsville * We were in Gladstone middle of last week doing an inspection on our new investment property which is in South Gladstone. The property is renting $90 p/w below expectations.
I picked up the booklet for Turtle Street Resort as I am a sucker for a glossy. My wife, the sensible one in our team, was not that approving.
I think the bridge needs to be sorted before the resort could be considered a real goer. the spot is great and the roads have been laid out.
We also attended a LNG meeting where lots of people from the LNG company answer any question you may have. There are multiple environmental impact statements open at the moment.
Some companies have the right to build on the mainland and some companies have the right to build on Curtis Island, where Turtle Street resort is planned for. Again the issue is will there be a bridge across the narrows or not? There are some companies which plan to run the operation via barge from Auckland Point in Gladstone, rather awkward I would have thought.
Anyway sentiment is down, lots of property on the market and lots of vacant rentals. I don’t expect (hope) this will last to long.
My real estate agent in Gladstone reckon’s capital growth is on the way.
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Personal Loan and Vehicle Loans
November 2009 - I can now write personal loans from GE and CITI, so if you are looking for a personal loan please don’t hesitate to contact me for the latest rates.
Also vehicle loans with some defaults (cleared) are possible.
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