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Whether you have been eyeing to grab a cozy spot or are swept over by the investment wave, HashChing recommends debunking popular real-estate myths before you make any investment decisions.

No hocus-pocus here, we bring you everything but the kitchen sink on popular investment beliefs.

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Myth#1: Rising prices are making properties unaffordable

Nope! While property price may be steadily rising especially in Sydney and Melbourne, the latest reports show that Australians have higher buying capacity than ever due to low interest rates and tax cuts on investments. This means that property buyers can take bigger loans and afford longer repayments to match up with the rise in prices.

Myth#2: Timing is everything

While you waste time hot spotting, you might lose out on some good deals. Instead of solely relying on property trends, a long-term outlook on investing may reap higher rewards.

Well, this myth is debunked as this is not necessarily a situation every time.

Myth#3: Seasons in the sun 

Contrary to popular belief, only desperate people do not sell in winters! Australian property market is hot throughout the year. According to the latest Australian Bureau of Statistics home loan data, total value of investment loans soared to $15.3 billion in June this year!

Myth#4: Myths around property valuation

Property valuation can be your friend in determining the fair value of your property in an open market. It can be requested by the seller or by the lender that is going to fund the purchase. It is a common misconception that Valuers are friends of the buyers and they assign buyer friendly rates to properties. This is not true as Valuers are professionals who use predetermined criteria to assign a fair value to a property regardless of the buyers or sellers.

Myth#5: Renovation increases the value of your house

Renovation can definitely add style to your house but keep in mind that all renovation projects may not necessarily pay off for a sale. Renovations undertaken solely to demand higher returns on sale have to be well thought of as apart from adding style, they must add value to the property. While knocking off that extra wall for few hundred dollars to build an open kitchen that is so in these days may add value, spending 50k on bathroom fittings may not be that good an idea if fittings worth 20k would suffice.

There is no formula that renovation will always lead to higher returns. It is ideal to consult your property agent before undertaking any renovations for the purpose of sale.

Myth#6: An interior decorator could make your property more appealing to buyers

Very true! Aren’t we are all taken by visual appearances? Well, in the housing industry, it is not just about how you decorate the house but also about what will catch the fancy of the buyers. A home designer could give simple ideas to keep the décor in line with ongoing trends. For instance, simple additions such as a fresh coat of paint or some new curtains could turn your house into a beauty setting buyers’ hearts aflutter.

Myth#7: You can’t buy property with less than 20% deposit 

Well, you could buy property even if you have only 5% deposit, though saving up to 20% could just ease up some cash for you. Loans with over 80% LVR may require Lenders Mortgage Insurance which can be an additional cost. Calculate your borrowing capacity to see how much you can borrow from the lenders based on your existing income and expenses. It is important to know that lenders use a higher interest rate to stress test your borrowing capacity, if there is an upward movement in interest rates.

Myth#8: Cheapest loan is the best strategy

As stressed in our previous posts, do not make the folly of simply choosing the loan that offering the lowest possible interest. Ensure that the loan you zero-in on is in line with your financial goals. It is not only the rate that matters, other features such as comparison rate for the term, total fee, over draft facility, flexible repayments also matter. HashChing is a convenient place where you could compare loans to see what fits the glove.

Myth#9: Best loan management: minimum and monthly repayments

Home loan interest is calculated on a daily basis but charged monthly, which means more frequent payments actually lead to lesser interest over the loan term.

Myth#10: Refinancing is for the wealthy; it costs money

No, no and just no! Refinancing can actually make you wealthy. With exit fee being banned in July 2011 and the low interest deals on offer, refinancing could save you a huge chunk of money. Potentially, a $300,000 loan with a term of 30 years and an interest rate of 5.65% p.a. refinanced at a rate of 4.6% p.a. can lead to savings of $229.43 per month and up to $82,592.87 over the duration of the term! Use the home loan switching calculator to calculate your total savings.

Now that we have dispelled some popular myths, we advise you not to fall for the fray. Property decisions are best taken with an open mind and after careful research. Be sure to request a FREE HashChing property report that can provide you useful information including expected rental yield. Additionally, the mortgage experts at HashChing are happy to answer your queries for free.

 

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