Proper Finance Solutions - July 2007 Newsletter

Reverse mortgage basics

Invented in the UK in 1980's, reverse mortgages, also called equity release, are now gaining popularity in Australia. This product is designed for asset rich cash poor individuals over 60. It allows to borrow against equity in existing property with the interest and fees added to the mortgage for the life of the loan. The loan balance goes up over time, hence the name - reverse mortgage. The funds can be used for any worthwhile purpose. Examples can be:

To supplement the pension or superannuation income
Travel, renovation or purchase of a motor vehicle or caravan
Financial assistance to family or friends
Quite often, elders would like to give some of their wealth to children or grandchildren with a 'warm hand' rather then in a form of inheritance after they pass away.

With the interest added to the loan balance, the most commonly asked question is if the loan will ever exceed the value of the property, so called negative equity situation? The answer is NO in most cases. The major player in this reverse mortgage market have a no negative equity policy. That means that should the loan balance approach the property value or the property market suffers a sharp fall, they will write off the part of the loan in excess of the property value.

Another feature of reverse mortgages is that the borrower can opt to protect a certain portion of their equity. For example, 20% of the property value can be nominated as protected equity. As a result, the loan will never exceed 80% of the property value and any excess balance will written off as above.

The interest rates on the reverse mortgages are slightly higher than the traditional home loans and range from 8.5% to 9.5%. To qualify, the prospective borrowers need to be over 60 and own their home. No questions asked about income or ability to service because no regular repayments are required. To enquire about a reverse mortgage for yourself or for your parents or grandparents, click here to contact us via an enquiry form.

In our next newsletter - January 2008

All you need to know about financing a commercial property in Australia.

We will be happy to discuss and research various options for your new or existing mortgage in Australia. There are plenty of deals in store for you, simply contact us by sending an enquiry.

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October 2007 Newsletter
Proper Finance Solutions Level 1, 530 Little Collins Street MELBOURNE VIC 3000 Australia telephone: +613 9909 7494 facsimile: +613 9909 7496			*In this issue:* Is the credit crunch affecting the property market in Australia? Recent testimonials Basics of the reverse mortgages Our selection of property and finance articles by Fairfax The Australian property market has shrugged off concerns about higher interest rates, upcoming election and the global credit squeeze affecting local lenders. All capital cities except Perth and Darwin recorded strong growth in property prices in Jul-Sep quarter. There has been a lot of speculation about Australian lenders including the major banks having to increase lending rates in excess of the RBA's August rise of 0.25%. Some smaller lenders and mortgage managers were forced to add extra 0.10%-0.25% to their mortgage rates to reflect the rising cost of funding. However, the banks seem to be playing a waiting game to see if disappointed borrowers will turn to them away from struggling non-bank lenders. Last week, the Commonwealth bank and NAB slightly increased their fixed rates by 0.05-0.10% and other majors are expected to follow. Another indication that the banks are feeling a pinch from the rising cost of funding is the fact that they are actively attracting funds from public. Recent specials on consumer deposits include ING bank and BankWest who are currently offering 7.0% on online saving accounts. This is well above the current RBA cash rate of 6.5%. Historically, the interest offered on a saving accounts was slightly below the official rates. Recent Testimonials Hi Hakly and Anton, I just want to thank you all for helping to arrange finance and settlement of my mortgage. Given that I am out of country it was very helpful to know that all was being taken of by you and Blackheath Conveyancing who you recommended. Phillip Vientiane September 2007 Dear Anton, Hakly and Chantal, Just wishing to write and thank you properly after settlement went through the other day. I have no problem recommending your services. Actually I have already told a few of my expatriate friends about proper finance - they mentioned to me they were looking to buy property in Australia but had no idea where to start. When I first called you I was quite upset as my experience with others made me think that my special circumstances as an employee of an international organisation would make it difficult for me to qualify for the mortgage I wanted. Right away after speaking with Anton, things got a whole lot better. I was very impressed with your service - I felt in good hands from the beginning, and right up until settlement you made sure I knew what was going on. Chantal and Hakly were great at walking me through the minutiae of the process. The service was prompt and personal. Really, I have nothing bad to say! Tomorrow I am picking up the keys and moving in and I am so grateful to you all. Hopefully, my next step will be an investment property, and I know where I will call. All the best and looking forward to dealing with you again in the future. Catherine, Melbourne/ Tarnagulla August 2007 Reverse mortgage basics Invented in the UK in 1980's, reverse mortgages, also called equity release, are now gaining popularity in Australia. This product is designed for asset rich cash poor individuals over 60. It allows to borrow against equity in existing property with the interest and fees added to the mortgage for the life of the loan. The loan balance goes up over time, hence the name - reverse mortgage. The funds can be used for any worthwhile purpose. Examples can be: To supplement the pension or superannuation income Travel, renovation or purchase of a motor vehicle or caravan Financial assistance to family or friends Quite often, elders would like to give some of their wealth to children or grandchildren with a 'warm hand' rather then in a form of inheritance after they pass away. With the interest added to the loan balance, the most commonly asked question is if the loan will ever exceed the value of the property, so called negative equity situation? The answer is NO in most cases. The major player in this reverse mortgage market have a no negative equity policy. That means that should the loan balance approach the property value or the property market suffers a sharp fall, they will write off the part of the loan in excess of the property value. Another feature of reverse mortgages is that the borrower can opt to protect a certain portion of their equity. For example, 20% of the property value can be nominated as protected equity. As a result, the loan will never exceed 80% of the property value and any excess balance will written off as above. The interest rates on the reverse mortgages are slightly higher than the traditional home loans and range from 8.5% to 9.5%. To qualify, the prospective borrowers need to be over 60 and own their home. No questions asked about income or ability to service because no regular repayments are required. To enquire about a reverse mortgage for yourself or for your parents or grandparents, click here to contact us via an enquiry form. Our selection of articles by Fairfax Picture of prosperity has a dark side OUR homes are bigger, our bellies fatter and we're spending more money than ever on things we want but don't necessarily need...more Credit squeeze will hit rates says RBA chief More borrowers will be asked to meet the costs of higher lending rates, with further problems in global financial markets expected to persist in the months ahead, the head of the central bank says...more Unemployment hits 33-year low Australian employment rose a little less than expected in October but the jobless rate dropped to a fresh 33-year low, keeping alive speculation that interest rates might have to be lifted again to restrain inflation...more RBA's vote may well go to rate rise JOHN Howard is nothing if not a gambler. No doubt he saw some advantage in delaying the election until November 24, but in doing so he's running a high risk of being hit by something no prime minister has faced before: an interest rate rise slap in the middle of the campaign...more IMF issues a warning, but are the US and China listening? COUNTRY A is borrowing a net $2 billion a day from the rest of the world — which seems odd to many, since it is not in obvious need. Country B is lending a net $1 billion a day to the rest of the world — which seems odd to many, since it has obvious needs around every corner...more In our next newsletter - January 2008 All you need to know about financing a commercial property in Australia. We will be happy to discuss and research various options for your new or existing mortgage in Australia. There are plenty of deals in store for you, simply contact us by sending an enquiry.
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