5 first homebuyer myth busters

For most of us, buying our first home is the biggest financial decision we’ll ever make. So is it any wonder that first homebuyers have reservations about the process, especially given there is so much advice floating around, including advice from well-meaning friends and relatives, who may not necessarily have their facts in order? Let’s bust the current top 5 myths relating to buying your first home and applying for the finance to buy it.

Myth 1 – I must be completely debt-free before I can apply for a home loan

Sure that would be the ideal situation. But being debt free is not a prerequisite for applying for a home loan. You could still be paying off a car or last year’s trip overseas. As long as you can demonstrate your ability to manage all your debts, including the mortgage, your application will not be dismissed by the lender.

Myth 2 – My parents will be out of pocket if they go guarantor on my loan

If your parents offer to go guarantor on your home loan to help you get into your first home sooner don’t worry that they will be out of pocket. They won’t be, unless you default on the loan down the track. No money actually exchanges hands when your parents go guarantor. They don’t pay the bank anything and they also don’t have to give you any money. Instead, they put their property (the home they live in or an investment property) up as security for your loan. If you default on your loan however, your guarantor is responsible for paying back the debt. So a lot of trust and responsibility is involved in a guarantor situation.

Myth 3 – A bad credit history means no lender will consider me

Worried that you have missed the occasional bill or rent payment in the past? While a bad credit history can make it harder to secure a home loan, it doesn’t make the process impossible, nor does it mean your credit history is tarnished forever. Just be completely transparent with your lender or mortgage broker about your current and past financial situation.

Myth 4 – You need a 20% deposit

While it’s always a good idea to put forward a decent sized deposit, you no longer need 20% to apply for a mortgage. These days you can secure a home loan with as little as 5% deposit as long as you can prove that you have the capacity to meet repayments of the larger loan you will need.  Most lenders will require you to take out Lender’s Mortgage Insurance (LMI) if you have a deposit of less than 20% of the purchase price.

Myth 5 – It’s cheaper to rent

Some people believe they will never be able to buy a home because they can’t afford mortgage repayments. They also believe it will be cheaper to rent for the rest of their lives. While it comes down to personal preference, it is not necessarily cheaper to rent when you consider the cost of rent in some areas compared to the median house price. Importantly also, buying property is a long-term investment. Any increase in the value of your property is to your advantage, not your landlord’s.  Furthermore, the more money you pay off your mortgage, the closer you are to owning it, especially with interest rates as low as they are. The same can’t be said when you are a tenant because your rent helps the landlord own the property.

With interest rates the lowest they have ever been and the median house price still at an affordable level in WA, now is an excellent time to get onto the property ladder.

Beat the cold without breaking the budget this winter

With plenty of people working from home at the moment, electricity usage will no doubt be higher for most people this winter. Not only would you be using more electricity on computers, printers and other equipment for your home office, but as temperatures drop and winter sets in, you’ll need to crank up the air conditioner or other form of heating you have at home to stay comfortable while working. Don’t forget, when you go to work in an office, your heating at home is switched off and your boss foots the office heating bill. Now you will need to cover those costs yourself.

Below are some tips to keep your energy bills manageable this winter, especially if you continue working from home.

1. Switch off devices when not in use

Switch off any office equipment such as a computer and other appliances when you’re not using them. The added bonus is that you will be less tempted to go back into work mode once the working day is done. It is also recommended to switch off appliances like the toaster and kettle at the power point when not in use.

2. Consider switching to a better deal

According to Choice, switching to a cheaper energy deal could save you up to $760 a year. If you haven’t compared your energy provider to others for a while, take advantage of the online comparison sites to do the work for you. Just be mindful though that commercial comparison sites may only compare offers from energy retailers they’ve partnered with. Before you switch though, give your current provider a chance to keep your business.  With so much competition, you may be pleasantly surprised about what they are prepared to do to retain your business.

3. Don’t turn the thermostat on the heater too high

Consider Ausgrid’s advice that a heated room should sit between 18 and 21 degrees Celsius. Every degree programmed into an air conditioner above 21 degrees will add roughly 10% to our energy bills. If at 21 degrees you still feel a little chilly, just pop on an extra layer or cosy up on the lounge with a throw rug.

4. Encourage the kids to do their homework in the living area or your office

This will save having to heat their bedrooms during the day. 

5. Get used to closing doors

Closing off rooms when they are not in use will save significant energy in heating and therefore money. If you can, close the doors to bathrooms with exhaust fans, as these can let cold air into a heated home and make heaters or air conditioners work harder.

6. Let the sunshine in during the day

Open curtains and blinds during the day to let in the sunshine in to warm your home naturally. Then close them at night to keep the heat in as an enormous amount of heat is lost through glass.

7. Prevent any draughts around windows or doors by sealing them to prevent heat escaping and the cold from entering.

8 things you should disclose about your home when selling

Did you know that a Seller’s Disclosure Statement is not mandatory in WA?  Despite this however, there is an expectation that a seller should disclose any material facts that could affect a potential buyer’s decision to buy. That’s because a buyer can always request to have a Seller’s Disclosure Statement completed. Furthermore, if you put yourself in the buyer’s shoes, the last thing you would want is to move in to your new home only to discover an issue, like asbestos, a non-compliant pool or that the home had once been used as an illegal drug lab and could potentially still be contaminated.

So what is deemed a ‘material fact’?

A material fact in real estate is defined as a fact that, if known, might have caused a buyer or seller of real estate to make a different decision with regards to remaining in a contract, or to the price paid or received. In practice however, it is a grey area. On the one hand agents are obliged to operate in the seller’s best interest and sell their client’s home at the best possible price. But on the other hand, they are also legally required to share material facts that are relevant to the sale of the property. 

Why disclose if I don’t have to?

Honesty is always the best policy. Be honest with your agent from the start. Moreover, if you fail to disclose a serious problem with the property and it is discovered later, you risk being fined and even jail time. It’s just not worth the risk.  

While the rules in WA are quite relaxed when it comes to seller disclosure, the Australian Consumer Law (ACL) has provisions that make it an offence to mislead or deceive parties to a contract.  So disclosure is your safest bet.

Here are eight material facts that you should disclose to your agent before you sell.

1. Asbestos

Asbestos has known negative long-term health effects. If your property has, or could have asbestos, it is perfectly legal to still sell it, but make sure you disclose this as it could result in you getting sued if you don’t and the buyer or someone in their family becomes ill as a result of asbestos contamination.

2. Illegal drug contamination

Like asbestos, illegal drug contamination is a potential health hazard. If you know that there is or was contamination of the property through its use as an illegal drug lab, you should disclose this information to the agent. Residents of a property used for the manufacture of methamphetamine for instance can become seriously ill due to the residue that remains and is very difficult to remove. For more information, read Illegal drug activity in homes. 

3. If a serious crime was committed on the property

People expect to be told if a serious crime – like a murder – was committed on the property, especially if they are thinking of buying it. Although you may argue that it happened a long time ago so why would it matter now, it is still important to disclose this information if it is known to you, as it may well matter to one buyer but not another.

4. If the property is currently tenanted

If your property is currently tenanted, it is important to disclose this information to the agent and all prospective buyers. The standard term to a contract is that the buyer will have vacant possession at settlement. If there is a lease in place, then it needs to be a condition of the contract.

5. Registration details of a pool and/or spa 

If you are selling a property with a pool and/or spa, whether you installed it or it was there when you bought it, you must be able to show the pool certificate that was registered with your local council. The WA Government also has strict rules in place regarding pool and spa barriers (fencing). If you don’t have a certificate for the pool or spa or you are unsure whether or not your pool fences are compliant, let your agent know.

6. Building approvals

It is recommended that you let your agent know if you have extended or renovated any part of your property without obtaining council approval. Most renovations or extensions need to have the correct up-to-date certificates. 

7. Encroachments 

If any structures, including dividing fences, encroach onto your neighbour’s property (beyond the boundary of your property) let the agent know.

8. Sewer pipe or cable

If you know that a sewer pipe or cable passes through your property (unless it is strata title) to provide services to other land you must disclose it.

For more information on what should be disclosed when selling and why, visit the WA Department of Consumer Protection website. 

Where is all the Govt. Assistance Money Coming From?

There is no question that we live in the lucky country. It is times like this that this statement rings truer than ever. With Treasurer Josh Frydenberg declaring “Extraordinary times call for extraordinary measures”, the Morrison Government unleashed a $130 billion wage subsidy for workers in a bid to save Australia from a deep and prolonged recession in the wake of COVID-19. But have you ever wondered where all this money comes from? And what about the question of how Australia will pay it all back?

Let’s start with the question of how the Federal Government gets money.

The Federal Government has a long-term commitment to balance incoming money from taxes with outgoing spending on infrastructure, welfare, health services etc.

Debt is incurred when government spends more money than it raises in a year, causing the budget to fall into deficit. Australian governments have never completely paid off their debts from previous downturns and crises. However economic growth has been such that it has dwarfed the size of the debt relative to our national income.

In order to keep paying regular incoming bills, such as public services wages, the government must borrow any shortfall, adding to its existing debt. Last financial year the Australian Government’s net debt stood at $373 billion or 19.2% of GDP (Gross Domestic Product). While this may seem like an extraordinarily high debt, this figure compares very favourably with other nations, including the UK and the US, which both carry debt worth around 80% of their respective economies.

At the last budget, the forecast was that we would achieve a budget surplus this financial year. That is no longer on the cards. In fact our net debt is now expected to exceed half a trillion dollars as a result of the current global health pandemic.

So how does the Government borrow?

The Australian Government’s debt managers are known as the Australian Office of Financial Management (AOFM). They act as intermediaries between the Government and its potential lenders. They establish online auctions for government bonds. Investors lodge bids to buy these bonds by indicating what interest rate they will accept in repayments.

As of April 3, the AOFM had $579.2 billion of these bonds on issue to investors. To fund the stimulus package, the Australian Government instructs the AOFM to conduct more frequent and larger auctions of these bonds. While this gives the Government access to money to fund the stimulus package, the level of debt will rise, as will the interest they have to pay back.

Who buys the bonds (in other words, who does the Government owe money to)?

Just over half of the Australian Government bonds are held by non-residents. They include foreign banks, central banks and investors, including large pension funds. The rest is held by Australian entities like banks, super funds and other institutional investors. The RBA has also started to buy Australian Government bonds. Ultimately we can expect the central bank to become a significant owner of Australian Government bonds.

How we will we pay the money back?

More than half a trillion dollars is a figure that most of us can’t even get our heads around let alone imagine how such a sum will be repaid. The answer is that it will need to be repaid slowly, over a very long time. Once COVID-19 has run its course and we have evidence that the stimulus has successfully protected jobs, we can expect a gradual lift in economic activity, producing more tax revenue. Once the budget returns to the black (surplus), we can start to pay down the accumulated debt. The mining boom of the 2000s helped restore the budget to balance after the 1990s recession, so it can be done again.

Will the next generation carry the burden?

Borrowing today will NOT impose an unfair advantage on future generations. With interest rates historically low, the interest bill will be kept low as well. Australia’s economy will grow again. We just need to let our debts become a smaller share of our growing economy over time. 

The key takeaway from all of this is: don’t be afraid of this debt. Its costs aren’t that bad. Furthermore, taking on this debt will very likely prove to be a great investment in the livelihood of Australians today and into the future.

5 ways pets can improve your health & wellbeing

Anyone with a four-legged friend at home will understand how much happiness pets bring to our lives. Whether it’s the energetic, joyful greeting of your dog when you when you walk in the door or snuggling up on the lounge with your cat, there is nothing that compares to the unconditional love shown to us by our pets.

Now that we are all spending so much more time at home, it’s more important than ever to appreciate the companionship that pets provide, especially for those who live alone. But did you know having a pet has proven health and wellbeing benefits as well? Science has proven a range of psychological and physiological benefits associated with pet ownership.

Here are 5 of those benefits:

1. Companionship

Companionship is probably the most obvious benefit of pet ownership but it is worth stressing, particularly at this time, when social distancing rules have taken us away from many of the people we love. If you have an elderly relative who lives alone, consider talking to them about the possibility of adopting or fostering a pet from an animal shelter for company. Naturally pet ownership or fostering isn’t right for everyone, and you should think very carefully through the decision to get a pet for an elderly relative, as they need to have the capacity to care for it. But if the situation allows for it, the right pet could help shift your elderly relative’s focus from their worries and loneliness to caring for their new four-legged friend. The same is true for anyone. Pets make wonderful companions.

2. Reduced stress and anxiety

Because pets live in the moment and are not worried about the future they can help encourage you to become more present and mindful, reducing the time you spend worrying about what might happen in the future. Research has found that patting a dog or cat can even improve risk factors caused by stress such as helping to decrease blood pressure and increase your serotonin and dopamine – hormones that make you feel happy and calm. Studies have even shown that having a pet, especially a dog, is probably associated with a decreased risk of cardiovascular disease. Click here to learn more.

3. They provide structure and routine

Working from home or not having work may be causing you to miss the routine and structure you had before. Having a pet can help bring that sense of routine back into your life, including getting out of bed at a reasonable time each day. All pets need to be fed at regular times daily but if you have a dog, it will provide added structure and routine due to their need for daily exercise as well, which is good for you too!

4. Physical contact/touch

Social distancing means many people are missing out on physical contact with others. Having a pet can fulfil that need for touch through pats and cuddles, as you don’t have to practice social distancing with them.

5. A reason to get some fresh air, sunshine and exercise

With gyms and other indoor sports centres closed, the only place to exercise right now is at home or outdoors. Furthermore, many people are spending more time indoors than they should, meaning they are missing out on Vitamin D from the sun and fresh air, as well as exercise. Having a dog that requires a daily walk is the perfect excuse to get up off the couch, grab the lead and go for a walk or a run. And now with the City of Melville lighting up 5 of our local parks for exercise and dog-walking after hours, there is no excuse not to fit a walk in.

So it’s safe to say that having a pet during the COVID-19 pandemic (or any time for that matter) is an excellent strategy towards staying well, physically and mentally.