GEMoney will temporarily waive their DAF
For the next 3 months, if you have a residential loan funded by GEMoney they will waive the *Deferred Administration Fee* if you refinance. This is good news because GEMoney are yet to pass on the RBA’s rate reductions and they typically have higher than normal exit fees..

Say goodbye to 95% refinancing
As of last week Westpac and CBA, the last two lenders that would refinance your investment properties out to 97% (including Lenders Mortgage Insurance), have amended their mortgage insurance policy which is now capped to 90%. Current purchases made @ 97% are still unaffected for the time being.

First Home buyers will need to show 3% genuine savings now in order to obtain a home loan. With variable rates so low and the government’s $14,000 FHOG burning a hole in most would be home buyer’s pockets, the mortgage insurers are now insisting that they put some skin into the deal. $14,000 was enough for a typical 1^st home buyer to buy a property in the low $200,000 ‘s with no other contribution. They now want 3% to be saved or held for 3 months which will no doubt slow some first home buyers down when it comes to realising that Great Australian Dream.

Warning on reviewable loans! Not sure if your business loan is reviewable? Do you have to supply the bank with a copy of your business financials every quarter or half year? If you do then it is quite likely your loan is reviewable. What this means is that the bank has the right to review your interest rate, as well as the terms and conditions of your loan on an annual basis. This usually only occurs with business overdraft, commercial buildings, or franchise / business Loans.

With the world’s lenders tightening the purse strings, now is a good time to opt out of these agreements and turn your loan into a *Term Loan*. This means it will have a set term of say 15 years, with the upside being…it isn’t reviewable, rather it’s a set and forget arrangement. In other words, if you change the way you trade or possibly downsize your operations, the bank cannot alter the terms of your loan agreement.

There is a bit more to all of this and I strongly suggest you talk to one of our professional brokers in more detail if you feel you could be affected.

St George has restricted cash out to $10,000 on low doc loans.

ANZ reduce their refinance and purchase LVR’s to 90% – In New Zealand we hear it’s gone down to 80%!

Westpac and Rams are the last two lenders that don’t require BAS’s for a low doc loan. All other reputable lenders now demand to see 12 months worth of BAS’s for the applicant, while some lenders will only accept 40% of the gross revenue shown on the BAS’s.

CBA are reverting to their old tiered structure for interest rate discounts on professional packages. Previously any aggregated loan portfolio over $250,000 received a 0.7% discount. They have now removed their special discounts in favour of the old tier system, effective as at the end of March (as illustrated below);
$150,000 – $350,000 0.5% off standard variable rate
$350,000 – $750,000 0.6% off standard variable rate
$750,000 and above 0.7% off standard variable rate

Given CBA are Australia’s biggest home loan lender, there’s a good chance others will follow suite. Stay posted!

Westpac has removed their 85% No Mortgage Insurance product for “purchases” (they stopped the refinance at 85% no LMI prior to Christmas last year).

ANZ are restricting cash out on fully verified loans. There’s no policy on this, but credit assessors are now asking for letters from financial planners and accountants detailing what the cash out will be used for. Future investment purposes used to work, but not now. It doesn’t seem to matter on LVR either.

Zayne and Patricia (names changed) started out like most other young couples, buying their own home to settle in before contemplating jumping into the world of property investment. With the combined effects of capital growth and slowly but surely paying down their loan, the couple managed to create sufficient equity to venture into the real estate game, but not quite enough to break into the tough Sydney and Melbourne markets they badly wanted to invest in.

They were determined to educate and prepare themselves to succeed in their property investment endeavours, attending various property seminars for a while, before taking the leap and buying their first investment property; a house and land package in Ipswich.

After some careful consideration, Zayne and Patricia devised a plan to undertake a “Block and build” project in an area where it was in fact much cheaper to build, than buy an existing home. In other words, the pair could virtually build a house and then have it re-valued at a higher price than what they originally outlaid.

They did all of the necessary research to ensure they found the perfect area to make their plan work for them, and after this extensive legwork, decided on Ipswich.

Before they bought the property they came and saw us to crunch the numbers and work through the finer details of financing the project, along with their dream Sydney purchase. We set their owner occupied loan up in the following way…

Diagram #1 – Home refinanced to release equity

The idea was to create two loans; the old owner occupied loan and the new investment loan. Both loans were to remain separate to keep it as easy as possible for their accountant.

Diagram #2 – Ipswich & purchase date

When Zayne and Patricia bought this house and land package there was still quite a bit of underlying buyer demand, so prices kept increasing which in turn gave them immediate equity.

Diagram #3 – Ipswich investment property with equity release

Once the Ipswich property was completed, we reapproached the bank and asked them to release the available equity so Zayne and Patricia could start their Sydney house hunt. The following diagram illustrates how this equity release worked. It was all done @ 85% LVR with no mortgage insurance required.

Diagram #4 – Leichardt purchase with use of equity from Ipswich investment property.

Zayne and Patricia’s Leichardt investment property was purchased using the equity created by Ipswich’s block and build – as demonstrated below.

Here at Trilogy, we have a diverse cross-section of clients from all walks of life who have one common goal – to create real wealth using residential real estate as their investment vehicle. As we assist our clients in their endeavours to continue building lucrative property portfolios, we ask them to share a part of their journey with readers of this newsletter and reveal where they are buying right now and why, as well as how their chosen investment fits with their overall strategy and long term goals. We hope this will inspire readers to commence or continue building their own wealth through property and provide some insight into different markets.

If you wish to provide any feedback as to what you would like to know about where our clients are buying and why or if you have any questions for our clients about their property investment experiences, please click here.

Ziggy and Mel
Success story Ziggy and Mel, who are also featured in this month’s case study, have just purchased another residential property investment to add to their growing portfolio…in the Sydney suburb of Leichardt. The two bedroom unit was secured for $358,000, with an anticipated weekly rent of $380.

Why did you buy this one?
Ziggy says; We had been looking to purchase a unit within 5 to 10 kilometres of the Sydney CBD for some time and Leichardt obviously fits that criteria. We also saw a great opportunity to purchase at the bottom of the cycle with excellent capital growth potential.

Peter and Louise
Budding investors Peter and Louise from Yass in NSW, just purchased a 2 bedroom, 2 bathroom, split level apartment with secure car accommodation that’s only 4 years old…in the Sydney suburb of Roseberry. They paid $435,000 and are currently realising $530 rent per week.

What attracted you to this property and location?
Louise says; It was mainly the green square development and locality to green square train station, plus the fact that Sydney is coming from such a low base. In our opinion, it should be the first city to really pick up from this downturn so we expect good capital growth into the future.

Christine Reynolds
Chris just bought herself a 2 bedroom unit with lock up garage in Sydney’s popular Randwick. Purchase price was $470,000 and rent is currently sitting at $480 per week.

Why this particular property?
Chris says; It’s in an older block and in need of minor cosmetic renovation, providing an opportunity to add instant value. What also appealed was the great location. It’s in strolling distance to cafes and cinemas, an easy 15 minute walk to Coogee Beach, close to the Prince of Wales Hospital and NSW Uni and a short commute to the Sydney CBD. I liked the area and it came highly recommended by my buyer’s agent.

Crunching the numbers on Christine’s purchase (NB. These are approximate calculations)

John and Jan
Victorian couple John and Jan have been quite active over the last few months, looking to take advantage of the great buying opportunities that currently exist to add to their growing investment portfolio. You may recall reading about their last purchase; a block of 6 units in Gladstone. They have since found another great property that ticked all the right boxes for their requirements.

John and Jan picked up the 3 bedroom, single bathroom, entry style property in Cranbourne West (around 35km SE from the Melbourne CBD) for a very affordable $244,000 and are expecting a 6% rental yield.

Why this location?
John says; It’s a developing area with a lot of first home buyers and not too many investors, so it has a good tenant/owner occupier balance. It is also in a bit of a “growth corridor” that’s being developed with good amenity and infrastructure, including freeway access to the city.

To fix or not to fix in this low interest rate climate? That is the question.

Many would-be investors and those who currently own a property portfolio are justifiably uncertain about what to do with regard to interest rates in today’s topsy-turvy economic climate.

Do you fix and potentially miss out on further reductions on the already exceptionally low rates on offer, or do you maintain a variable loan structure and hope that our recent good fortune continues?

Currently, 3 and 5 year fixed rates are floating around the 5.2% and 6.3% mark respectively, depending on individual lenders. In comparison, variable professional package rates are at about 5.1%.

While some special fixed rate packages might be very tempting right now, it is my personal opinion that we are soon going to see offerings of a 3 year fixed term as low as 3.99% and possibly 4.99% for 5 years.

Now I am quietly confident about this. Why? Because at the present time, around 90% of all loans are currently being lodged with Australia’s 5 major lenders, which clearly isn’t healthy (this is another story for another day!). Many of the second tier lenders like St George, Heritage, Adelaide Bank and Suncorp are simply missing out on their slice of the proverbial pie. As a result, it is quite likely that these smaller lenders will soon buy a large batch of money and offer it to the market at a discounted rate, in order to win back customers.

Of course we saw this happen at the end of November last year, with Westpac offering an enticing 4.99% fixed rate for 3 years. This “get it while it lasts” deal was on the table for all of three weeks or so before it expired. Since then the RBA has sliced a further 1% off the cash rate, so it is quite conceivable that we could see a very appealing low fixed rate offering from a non major in the near future.

Do the maths on your property with an interest only loan @ 3.99% and I guarantee it’ll make you smile!

In anticipation of this impending competitive fixed rate battle, Trilogy is setting up an exclusive Fixed Rate Alert for readers of this newsletter. A soon as we get wind of a “great” deal that’s about to hit the market, we’ll SMS and email you the details. Be warned though – when notified of a special offer you’ll need to act quick sticks because these deals typically expire within weeks.

While we’d like to be able to personally call everyone, we just don’t have the resources to contact the 2000 plus people currently in our database within 2 to 3 days, so please click here to register for this special Fixed Rate Alert. You will receive a confirmation email and SMS of your registration.

Rest assured that we will only send you the very best, red hot deals. We won’t waste your time with “ordinary” offerings; it has to be a fantastic package from a reputable lender, which I believe is not too far away.

So to make sure you’re one of the first to know about these incredible deals that can save you thousands, click here to register for our exclusive Fixed Rate Alert today.