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Mortgage News |
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December 2006 |
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After the latest interest rate increase, we explore the future of interest rates, and their likely fall over the next year. What does this mean for homeowners? The opportunity to drive mortgages down by adding the saved interest back into the mortgage, or even using the extra funds to invest.
With mortgages still in mind, we find you can save thousands by having a mortgage that is suitable to your needs, and we give you a few pointers on how to find it. More on budget matters we discuss how to celebrate the Christmas season without breaking the credit card limit, and a few new year financial resolutions you can set for yourself.
We hope you enjoy,
Your Name
XYZ Homeloans
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Value your home
Don't underestimate the importance of knowing the value of your home. |
As the major asset of any household, a property valuation should be part of a regular review of your financial health. And there are some very important reasons for doing so.
Explore investment opportunities - The equity you've built up in your home can be used to generate wealth elsewhere, such as investing in residential property or, if you are looking for increased liquidity, shares. A house valuation will reveal how much equity you have in your home, and may be the first step in building an investment portfolio.
Ensure you're properly covered - A home is a valuable asset, and you'll want to be sure yours is fully protected. If you're underinsured, you could be in for a major loss should your home or property be damaged. Avoid this predicament through keeping track of home improvements and purchases and regularly calculating what they add to its value.
For estate planning - A home is one of the most significant assets you'll pass on to your dependents. As such, major
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changes in the value of your property can affect how you choose to divide your estate. A home valuation is therefore an essential part of proper estate planning and will ensure that your property is distributed in an orderly and efficient manner.
When it's time to sell - With realistic expectations of the current market price of your property you can time the sale of your property so to take full advantage of its selling potential.
Keeping on top of the changes in your home's value is an important tool for understanding the overall state of your financial well-being. Location, condition, size, current market conditions and potential for appreciation are all important factors when determining a property's value.
There are numerous websites available that offer free property value assessments, or for a more extensive valuation contact a professional property valuer. Your mortgage broker will be able to recommend one in your local area.
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Sure-fire steps for finding a mortgage suited to you
Matching a suitable mortgage to your needs may save you thousands in interest payments over the life of your loan. |
With so many loan products available you can be sure there's at least one that matches your situation. In your hunt to track down a suitable mortgage, here are a few points to keep in mind.
How much should I borrow?
Banks will determine how much they are willing to lend you based on a number of criteria; however, that doesn't mean you should take the maximum amount they offer. Closely examine your finances to determine what you can afford to spend. Be honest and work out a realistic budget, factoring in all regular commitments, such as school fees, car payments, and food, as well as all those entertainment expenses. What's left can be channeled into any mortgage repayments.
What type of buyer are you?
Your personal situation will determine what mortgage suits your needs, as well as what type of products are actually available to you. Are you a first time buyer, for instance, or are you refinancing an existing debt? Perhaps you're looking for solid capital growth in an investment property or the home you'll spend the rest of your life in? It's important to consider why you're buying and finding a mortgage that complements that.
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Do your homework
Speak with your mortgage broker - they're in a great position to help
you compare different loans and lenders to see how they suit your circumstances. Decide what loan features you require to meet your objectives
- for example are you looking for flexibility to pay off your mortgage quickly? - and then go in search for a suitable deal. Some of the most common loans that may meet your requirements include:
- Fixed rate - can help soften impact of any future rate rise
- Split rate - offers the security of fixed rate with the flexibility of a variable rate
- Line of credit - good for financing renovations or additional property investments
- Lo-doc (or no-doc) - for the self employed, usually require less documentation, such as establishing proof of income
- No deposit - can't save for a 20% deposit? This loan will let you finance 100% of the purchasing price, although usually with a higher interest rate
- Interest-only - popular for investors who don't want to pay the principle component of a mortgage. Usually lower repayments amounts, leaving room to pursue other investments
- Construction - for additions or building your own home
There are a range of tools now available, such as the internet, to help research, compare and contract loans. For many borrowers, however, lending advice from a broker is the easiest and usually
most effective option for avoiding confusion and finding an appropriate loan for your needs.
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| Secure your home over the summer holidays |
As most of us get ready to relax and unwind on a well earned trip over summer, burglars are also preparing for their summer break...in! Here are a few tips to take you off their hit list:
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Inside:
- Turn down the volume on your telephone so people don't hear unanswered calls.
- Have a lamp at the front and back of the house on alternate timers to create movement. Also, set a radio on a timer to add some noise to your otherwise empty house.
- Don't close the curtains, but be sure not leave valuables in sight
- Deadlock all doors and windows.
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Outside:
- Tidy your yard by mowing the law, watering and trimming back trees or hedges that could hide an intruder.
- Cancel all deliveries like milk and papers.
- Leave a spare key with a friend; ask them to collect your mail and put the bins out. They could also hang some towels on the line to make your place look lived in.
- Let your neighbours know that you're going away, and ask them to keep an eye out. They could also park their car in your driveway occasionally.
- Securely lock back and side gates; be sure to place any valuable items like bikes inside your home.
- Install outdoor movement sensor lights.
- Turn off your water.
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'Tis the season to be prudent
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Christmas is fast approaching. And, sure as there's snow in Lapland and sun in Gisborne, your credit card will be called into action over the next few weeks.
Traditionally, credit card debt soars over the festive period, as New Zealanders borrow to cushion the burden of present-buying, party-going and holidaymaking. There's also the post Christmas sales, when the advertisers roll out their Christmas campaigns,
the shops unveil those enticing displays, and it can be hard to avoid getting swept up by it all.
However, there are ways of keeping your Christmas spending under control, without resorting to Scrooge-esque stinginess.
How? In a word: budget. Be realistic about your incomings and
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outgoings. Cover the basics first by allocating money for the household bills. Then, as the present requests roll in, be ready to make tough distinctions between essential and non-essential items.
If the kids want a fancy new plasma TV, avoid putting it on credit. And if you really can't afford it - ask yourself if there is another alternative without getting them too upset.
By taking a step back and assessing what is genuinely affordable, rather than simply desirable - because, hey, it's Christmas - you will be better placed to make informed decisions on expenses.
There is nothing wrong with putting smaller purchases on the card, so long as you have earmarked which part of next month's wage packet will cover the debt. As always, the golden rule of credit card spending applies: pay it off as soon as possible.
Christmas parties, whether you are the host or guest, should also be approached with prudence. Also beware the hidden overheads, such as the extra trip to the supermarket, the additional bottles of wine or crate of beer. These things have a nasty habit, in the rush of preparation, of creeping
into your next credit card bill.
If you're going away over Christmas, consider including the expenditure on your holiday in your overall spending budget,
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rather than filing it away as a special case under "other outgoings".
And perhaps most importantly of all, when the post-Christmas sales start up, don't undo all your good work of the previous
month. Take a look at your finances. If there's room left for one or two more bargains, then by all means go for it - but leave the credit card at home unless you're absolutely sure you can pay it off.
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| Financial resolutions for the New Year |
The new year is a time for reflection on the year gone by while making resolutions for the one to come. So why not take the opportunity to use this time to improve your finances? Here are three finance improving resolutions for the new year.
I will organise myself for tax time. Despite all your good intentions,
did you find it difficult to track down all those receipts when it came time to file you tax return? You could be missing out on some serious deductions. Get organised through creating a simple
tax organisation system - it can be as simple as a shoe box where you place receipts to a more in-depth filing system. The New Zealand Inland Revenue website also has advice outlining which records should be kept and filed as a deduction.
I will save. Do it the old fashioned way and get a money box - preferably one you can't open without breaking. Throw a few coins in everyday you'll be surprised how it will add up. By the end of the year you'll be able to splurge on something for yourself!
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I will have a mortgage health-check. Over time your circumstances
can change and your old mortgage may no longer suit your needs. Speak with your broker to find out whether there's a better loan product available.
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Economic round-up
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The New Zealand cash rate has stayed at 7.25 per cent throughout 2006 after nine rises between January 2004 and December 2005. So what can homeowners expect to happen to rates for the year ahead, and what are the factors that are likely to influence the Reserve Bank of New Zealand (RBNZ)?
According to the Organisation for Economic Cooperation and Development (OECD) the slowing of the New Zealand economy may pave the way for interest rate cuts in 2007. The OECD has tipped inflation to slow from 3.6 per cent in 2006 to 2.8 per cent, which falls into the RBNZ's target range of one to three per cent.
In the RBNZ's recent quarterly survey, business managers have also indicated that they expect inflationary pressures to ease over 2007. The survey revealed that respondents believe annual inflation to average
three per cent over the coming year - considerably lower than the expected 3.5 percent in the previous August survey.
However, despite the optimism, the RBNZ has warned that rates may still be increased should inflationary pressures become a concern.
Overall the news should be seen by property owners in a positive light. Though there are no guarantees that rates will go down anytime soon, the indications are that the economy has slowed, and will continue to do so over the coming year.
World oil prices are stabilising, which bodes well for the economy as well as for the pocket of most New Zealand homeowners.
Lower oil costs generally mean that the production and transportation of goods and materials is lower; this in turn may lower the sale price of finished items. Lower prices means lower consumer spending, which is a big factor in keeping inflation down.
Should interest rates fall, homeowners have a couple of golden opportunities with their mortgages: homeowners can help drive their mortgage down by putting the saved interest back into their mortgage, thereby reducing the principal and interest that's charged.
Most lenders will allow borrowers to pay additional funds into their mortgage, and the results can be dramatic in the long-term.
Reduced interest rates also gives the homeowner a greater capacity to borrow, thus leveraging off the homeowners existing property, to buy an investment property. Seek advice from your mortgage broker.
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Disclaimer. This newsletter does not necessarily reflect the opinion of the publisher. It is intended to provide general news and information only.
While every care has been taken to ensure the accuracy of the information it contains, neither the publishers, authors nor their employees,
can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this publication can be reproduced or
reprinted without the express permission of the publisher. Readers are advised to contact their financial adviser, broker or accountant before
making any investment decisions and should not rely on this newsletter as a substitute for professional advice.
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