FIRST HOME OWNER’S GRANT (FHOG)

$7,000 for established properties priced up to $750,000

First Home Buyers must occupy the home within 12 months and live there for at least 6 months

STAMP  DUTY  BENEFITS

There are 2 stamp duty concessions currently available in Victoria:

  1. Principal Place of Residence (PPR) discount : available for ANY owner-occupier who will live in the property for at least 12 months. Maximum price $550,000. Maximum stamp duty discount $3,100
  2. 30% First Home Buyer stamp duty discount : buyers MUST be eligible for the FHOG and be settling the purchase on or after  01.01.2013.  Purchase price must not exceed $600,000

First Home Buyers can receive BOTH of these duty discounts if buying for less than $550,000 in Victoria

Example: Purchase price $500,000 (owner-occupied residence)        

Normal stamp duty

$25,070

PPR discount

3,100

=

Net duty

21,970

30% FHB discount

6,591

=

Balance payable

$15,379

STATE REVENUE OFFICE  APPLICATION FORM  (Form 53B)

Both of the above stamp duty discounts can be applied for by completing the SRO Form 53B. Your solicitor or conveyancer can complete this form for you. If you are applying for the 30% First Home Buyer discount, you MUST be eligible for the FHOG.  On Part 7 of the form, you must include the FHOG  Unique Identification Number (UIN). Without the UIN, you cannot receive the 30% FHB discount.

FURTHER ENQUIRIES

Contact Victorian State Revenue Office telephone hotline   13 21 61

MELBOURNE MORTGAGE FINANCE HOME BUYER BENEFITS 2011-12

FIRST HOME OWNER’S GRANT (FHOG)

$7,000 for established properties priced up to $750,000

$20,000 for newly-built homes in Melbourne area : Building Agreement price cannot exceed $600,000

$26,500 for newly-built homes in Regional areas : Building Agreement price cannot exceed $600,000

First Home Buyers must occupy the home within 12 months and live there for at least 6 months

STAMP DUTY BENEFITS

There are 2 stamp duty concessions currently available in Victoria:

  1. Principal Place of Residence (PPR) discount : available for ANY owner-occupier who will live in the property for at least 12 months. Maximum price $550,000. Maximum stamp duty discount $3,100

  2. 20% First Home Buyer stamp duty discount : buyers MUST be eligible for the FHOG and be settling the purchase after 01.07.2011. Purchase price must not exceed $600,000

First Home Buyers can receive BOTH of these duty discounts if buying for less than $550,000 in Victoria

Example: Purchase price $500,000 (owner-occupied residence) Normal stamp duty
$25,070
PPR discount
3,100
= Net duty
21,970
20% FHB discount
4,394
= Balance payable
$17,576

STATE REVENUE OFFICE APPLICATION FORM (Form 53B)

Both of the above stamp duty discounts can be applied for by completing the SRO Form 53B. Your solicitor or conveyancer can complete this form for you. If you are applying for the 20% First Home Buyer discount, you MUST be eligible for the FHOG. On Part 7 of the form, you must include the FHOG Unique Identification Number (UIN). Without the UIN, you cannot receive the 20% FHB discount.

FURTHER ENQUIRIES

Contact Victorian State Revenue Office telephone hotline 13 21 61

Fixed interest rate loans can be an advantage to borrowers in certain circumstances:

  • when certainty of monthly loan repayments is required

  • when borrowers wish to protect themselves against anticipated variable interest rate increases

  • when there is little likelihood of a need to terminate the loan prior to the expiry of the fixed rate term

  • when borrowers do not require the benefits of normal variable rate loans  e.g. ability to make large repayments, redraw of additional funds paid

However, fixed interest rate loans can be inappropriate in other circumstances:

  • if there is a substantial reduction in variable interest rates as occurred during the Global Financial Crisis

  • if borrowers have to terminate a fixed rate loan early : substantial penalties can apply (these are known as Break Costs)

  • if borrowers require greater flexibility to make large lump-sum repayments or redraw on extra funds already paid

The following article from the Credit Ombudsman’s Office provides excellent detailed information on the potential pitfalls of locking into a fixed rate loan contract.

Fees for other common items will be set out in your lender’s contract, including:

  • valuation fee for an additional security property
  • deferred establishment fees : charged by some lenders if the loan is voluntarily terminated in the first 3-5 years
  • monthly account fees
  • additional advance fee : if additional funds are needed later on
  • revaluation fees : charged by some lenders for revaluing the property every 3-5 years
  • switch fee : if contracts are amended later on from variable to fixed rate or vice versa
  • break costs : if fixed rate contracts are voluntarily paid out early and interest rates are lower than agreed to in the initial contract
  • discharge fee : covering the cost of discharging the mortgage
  • portability fee : if the loan needs to be transferred to another security property

Lenders will usually outline their fees and charges on their websites and in their brochures. It is mandatory that all fees and charges are listed in their loan contracts.

The cost of establishing the reverse mortgage loan varies significantly from one lender to another. Establishment fees range from $500 to $1200, although some lenders occasionally have “nil fee” special offers. The average cost is about $850, but this does not include the cost of borrowers obtaining their own independent legal advice. Some lenders also require that seniors obtain independent financial advice as well.

Lenders will usually offer a choice. The type of interest rate you select will depend on your circumstances and your views on future interest rate movements. There is no simple or correct answer.

Variable rates can move up or down at any time. Reverse mortgage lenders can and do alter their variable rates regardless of monthly decisions announced by the Reserve Bank. Reverse mortgage lenders will generally allow monthly or partial lump sum repayments to be made at any time without penalty. If your circumstances change significantly, you can usually pay out the loan in full without interest penalties, however lenders can charge Early Repayment or Deferred Establishment Fees if the loan is voluntarily discharged in the early years.

Fixed rates remain static for the agreed period. If rates fall, you will still pay interest at the original agreed rate. If rates increase during the fixed rate period, you will not be affected. A significant disadvantage is that lenders can charge a “break cost” if the contract is voluntarily terminated early. These costs may be waived, however, in the event of death or movement into permanent aged care. You should clearly understand the potential penalties before proceeding.

Normally, receipt of reverse mortgage funds is not considered taxable income. It is simply a return of the capital tied up in your home. Tax issues could arise, however, if funds are invested to produce an income or purchase an asset that may later be sold to produce a capital gain. Financial advice should always be obtained if you have concerns about taxation issues.

  • ensure that your lender is a member of SEQUAL. Senior Australians Equity Release Association of Lenders is a not-for-profit association supported by leading reverse mortgage providers in Australia . SEQUAL is responsible for ensuring that reverse mortgage lenders maintain market best practice in the development and promotion of their products to seniors
  • ensure that you obtain independent legal advice
  • ensure that you have considered obtaining independent financial advice
  • ensure that you have considered discussing your reverse mortgage plans with your family or beneficiaries
  • ensure that your reverse mortgage lender offers a “no negative equity” guarantee and an “equity protection option”
  • ensure that your reverse mortgage lender’s product allows you the flexibility to suit your future needs e.g. additional borrowings or the right to rent out your home if you travel or move into an aged care facility.

Yes. Instead of borrowing money using a reverse mortgage, some possible alternatives may exist and should be considered:

  • selling other personal assets or property
  • cashing in other investments
  • family financial assistance
  • downgrading your home and using excess sale proceeds
  • returning to work full-time or part-time

These alternatives may not be practical, particularly if other assets are of insufficient value or longer-term family assistance is not possible.

In most cases, yes. If you plan to leave your estate to your children, the value of the estate will be reduced by the balance of the reverse mortgage loan at the time of discharge. Reverse mortgage loan balances increase over time if no interest payments are made. Beneficiaries will receive the net value of the estate after the reverse mortgage loan balance and any other debts are paid out.

It should be remembered that reverse mortgages now allow seniors the flexibility of retaining the home. Retaining the home for the next generation will result in the transfer of a significant property asset which would otherwise not occur if seniors were forced to sell the property because of a lack of cash to live on.

When considering a reverse mortgage, it is essential to obtain independent legal advice and possibly independent financial advice as well. Family involvement is generally also recommended by lenders. Your personal and financial circumstances must be considered carefully before deciding to proceed.

Centrelink
If you currently receive a Centrelink benefit, you should be aware of any possible adverse impacts a reverse mortgage may have on your entitlements. If funds are used immediately for general consumer purposes such as travel, home improvements or clearing other debts, entitlements will usually not be affected. If you buy a car, invest borrowed funds, leave cash sitting in your account for more than 90 days or provide a large gift to a family member, then your benefits may be affected.

Speak to your Financial Information Services Officer at Centrelink to establish your position.

Legal Advice
All lenders require seniors to obtain independent legal advice from their solicitor. Loan contracts are usually sent to the solicitor you nominate on the loan application form. You should check with your solicitor to confirm that he/she is prepared to fully explain the loan terms and conditions to you, as well as sign a Solicitor’s Certificate confirming to the lender that this advice has been provided.

Financial Advice
Lenders will encourage seniors to obtain independent financial advice from a qualified financial adviser or accountant when applying for a reverse mortgage. Some lenders formally require you to do so. This is to ensure that your overall financial position is properly assessed and the decision to proceed is supported.

Family Involvement
It is important to consider discussing the reverse mortgage with your family or beneficiaries. In most instances, the repayment of the loan balance in the future will affect the value of your estate and if they are executors of your estate, they will be responsible for discharging your reverse mortgage loan balance in the future. Children will usually support your decision to proceed with a loan, especially if there is no other practical solution to your financial needs.

After the death of the last surviving borrower, beneficiaries will need to repay the outstanding reverse mortgage loan balance within the lender’s required period. This can be up to 12 months. While the home can be sold to repay the loan balance, this is not mandatory. Beneficiaries may elect to keep the family home and either rent it out or occupy it themselves. This will require the beneficiaries to arrange a new loan which will be used to pay out the reverse mortgage loan within the allowed period.

Lenders have different rules should borrowers require a move from the family home into permanent aged care. Some lenders require automatic full repayment of the loan when this occurs. It may require the family home to be sold or the reverse mortgage loan to be paid out by another lender. Other lenders will allow seniors to rent out the family home, with rental income helping to cover the interest charged on the reverse mortgage.

Borrowers should look carefully at the lender’s policy regarding a move into permanent aged care. It may trigger the required full repayment of the loan within an agreed period and this may not be the wish of borrowers or their beneficiaries.

With variable rate reverse mortgage loans, some lenders allow loans to be fully repaid from sale proceeds or inheritance monies with no early repayment penalties. Other lenders do charge an early repayment fee if the loan is voluntarily and fully repaid within periods of 3-5 years. This penalty is often referred to as a Deferred Establishment Fee and is usually calculated on a reducing scale down to zero after the agreed period.

With fixed rate loans, most lenders will also charge “break costs” if the loan is voluntarily discharged prior to the expiration of an agreed fixed rate period, especially when fixed rates have declined since the loan commenced. Some lenders allow seniors to make additional lump sum repayments on a fixed rate loan without penalty e.g. up to 10% of the advanced amount per annum, but all lenders will have different policies on this.

Check your lender’s contract conditions carefully for Deferred Establishment Fee charges and fixed rate “break costs”. As mentioned previously, “break costs” are generally not charged by lenders when fixed rate loans are fully repaid following the death of borrowers or their placement into permanent aged care.

If you sell your home voluntarily and no longer require the loan, the loan must be repaid immediately upon settlement of the sale of your home.

In the event of the death of the last surviving borrower, beneficiaries are allowed periods of up to 12 months to sell the property and repay the loan balance in full. Some lenders also have a requirement that the loan must be fully repaid within an agreed period of borrowers moving into permanent aged care.

All reverse mortgage lenders will have specific terms and conditions in their loan contracts which clearly outline when the loan is to be fully repaid.

Yes. Lenders have website calculators which enable seniors to estimate what the loan balance will increase to over a number of years. These calculators generally do not take into account any monthly interest payments or any lump sum payments you may make in the future, so you will get a “worst case” outcome. Such payments will reduce the rate at which the reverse mortgage loan balance increases.

The level of remaining equity in your home will depend on a number of factors including:

  • how long your reverse mortgage runs for
  • the interest rate charged on your loan
  • the level of future increases in the value of your home
  • whether or not you make any monthly or lump sum repayments
  • whether or not you borrow additional funds later on

This website has a calculator and you can also use the Federal Government’s ASIC website which is called “FIDO”. It can be found at www.fido.gov.au/equityrelease and allows seniors to estimate future scenarios including reverse mortgage loan balances, house values and remaining equity values. Different interest rates and house value growth rates can be inserted to show different potential outcomes.

What our customers say about us

Thanks for all your help and for making it so easy for me. Life will be so different now.

Jan Vincent
Montrose, VICTORIA

Thank you for your time on the phone yesterday and copying me into the below email.
I just wanted to take the time to say that I have never seen such a comprehensive email provided to clients by a Broker before. Very clear and detailed.
I hope it’s ok that I hold onto your details to refer to clients who may need assistance.
Kind Regards,

Shannon Oatley
Director & Licensed Conveyancer
Property Conveyancing Group, VICTORIA

We have found Barry Le Brocq of Melbourne Mortgage Finance to be very patient, caring and diligent in achieving a successful outcome to our refinancing requirement. We have no hesitation in recommending his services to others.

Don & Christine Perrett
Leongatha, VICTORIA

Many thanks Barry for the exceptional service that you have provided. We will most certainly be recommending you to our daughter (Bank of Melbourne branch manager) for any future customers who need a reverse mortgage loan.

Paul & Barb Spark
Somerville VICTORIA

 

LENDING UPDATE 14.06.19

  • LIVING EXPENSES ARE NOW A KEY ISSUE
  • COMPREHENSIVE CREDIT REPORTING NOW IN EFFECT
  • INVESTMENT LOANS AT OWNER-OCCUPIER INTEREST RATES
  • REVERSE MORTGAGE LOANS FOR SENIORS OVER 60
READ MORE

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  • ongoing availability to assist you after loan settlement
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