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What is LVR (Loan to Value Ratio)? – Holly Jones

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Moreton Investor, Property Management, Investment properties, Real estate Moreton, Mortgage Broker Moreton, Moreton property market, Moreton property prices, rental properties, LVR, Loan to Value Ratio

LVR is an acronym you’ll see a lot in property news, reports and documents and is used throughout the property industry.

Moreton Investor, Property Management, Investment properties, Real estate Moreton, Mortgage Broker Moreton, Moreton property market, Moreton property prices, rental properties, LVR, Loan to Value Ratio

But what does it mean?

LVR = Loan to Value Ration. 

It’s also seen as LTV Ratio – Loan to Value Ratio.

What is LVR?

LVR is the proportion of money you borrow (loan) compared to the value of the property.

Finance lenders will examine your LVR before agreeing to give you the money needed to purchase your property as a way to assess your risk as a borrower.

The higher your LVR, the most of a risk you are.

Calculating LVR

To calculate your LVR your lender will divide the value of the property (the purchase price) by your deposit to ascertain the the amount of money you need to borrow (the loan value).

eg. If you are buying a property which is $500,000 and you have a $100,000 deposit (20%), you would need to borrow $400,000 and your LVR would be 80%.

400,000 ÷ 500,000 = 0.8

0.8 x 10 = 80, which makes your LVR 80%.

An LVR over 80% usually indicates a deposit under 20%, which most likely means you’ll need to pay extra to secure your loan – this payment is called LMI – Lenders Mortgage Insurance.

High LVR

Home loans with over 80-90% loan to value ratio (LVR) are considered quite dangerous.

The danger with a 90% home loan for a lender is that your monthly repayments and loan terms are higher than they would be if you had a 20% deposit, or more. For this reason LMI is usually charged.

Here are a few things you need to keep in mind if you have a higher LVR:

Guarantor home loans

  • A family member, usually your parents, agree to use their property as a security for your loan.
  • Your guarantor will also be held liable if you default on the loan.
  • If you’re prepared to mix finances and family, make sure you are aware of how you and your guarantor’s financial position can be affected.

Low deposit home loans

  • Most lenders – even the big banks – only require a 5% deposit. But these types of home loans will have bigger repayments because you’re borrowing more.
  • You will also incur LMI and you will be adding more stamp duty costs.
  • A good idea is to also have extra funds to act as an emergency buffer in case interest rates rise again.
  • As a rule of thumb, always prepare for interest rate rises of 2-3%

Long term mortgages

  • Typically, a long-term mortgage is considered to be more than 30 years.
  • May seem appealing because you have lower repayments
  • Reality is you end up paying more because of the length of the mortgage
  • Eg. If you borrowed $400,000 on a 40-year mortgage, you would pay $193,000 extra in interest than you would with the same loan but on a 30-year term (based on a 6% rate).

Whenever you’re borrowing money to purchase or refinance a home, it’s always a good idea to proceed with caution and consider the danger you pose to yourself and your family. Always compare home loans and understand all the pros and cons of the type of mortgage you choose.

Original article published on www.realestate.com.au/blog  by Holly Jones  7/11/2013

Investment Advice

SEQ Population Growth needs 12 Springfield-style mega cities to cope: Planner

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Southeast Queensland needs a dozen mega-developments like Springfield if it is to cope with the extra 2.2 million people over the next three decades, a respected urban geographer has told Fairfax Media.

Springfield is expected to be home to 80,000 people by 2030. Photo: Glenn Hunt

Springfield is expected to be home to 80,000 people by 2030. Photo: Glenn Hunt

Professor Bob Stimson, Emeritus Professor in Geographical Sciences and Planning at the University of Queensland, told Fairfax Media there would be 5.5 million living between Noosa and Tweed Heads within three decades.

Professor Stimson – an analytical human geographer and regional scientist for 49 years – said Southeast Queensland could no longer rely on increasing densification with the existing area.

Population growth will require up to a dozen mega-planned communities to cope with an extra 2.2 million people. Photo: Glenn Hunt  Read more: http://www.brisbanetimes.com.au/queensland/seq-population-growth-needs-12-springfieldstyle-mega-cities-to-cope-planner-20150626-ghyxzb.html#ixzz3fdZRqltR

Population growth will require up to a dozen mega-planned communities to cope with an extra 2.2 million people.Photo: Glenn Hunt

Professor Stimson said between “10 and 12” large master-planned communities like Springfield or North Lakes – on Brisbane’s northern-edge – would be needed for the extra 2.2 million people.

“There is no way that all of the growth that is going to occur can be accommodated through urban infill,” Professor Stimson said.

“You are still going to need greenfield growth, fringe growth,” he said.

“So the big issue for Southeast Queensland over the coming decades is that you are probably going to need 10 or 12 of those types of developments to be occurring.”

Greater Springfield is a privately-owned 2680 hectare master-planned community south of Ipswich that has around 20,000 residents in two suburbs; Springfield and Springfield Lakes.

It started around 1995 and is planned to have 80,000 residents by 2030.

Professor Stimson said “green belts” between the Gold Coast, Brisbane and the Sunshine Coast were under pressure, but he believed would be protected because of the state government’s Southeast Queensland Regional Plan.

He said there was land near Beaudesert and Ipswich and between Brisbane and the Gold Coast for residential development.

“There is plenty of land that is not prime agricultural land, that is not ecologically important land, national park or high conservation-value land that could be taken up for that sort of growth.”

On Friday Australand launched a $400 million master-planned community for 25,000 people over 25 years called The Rise at Park Ridge in the Logan City Council area.

Australand’s Queensland general manger of  residential growth Cameron Leggatt said the development targeted low-cost home and land packages ($280,000) and provide 13,000 local jobs over 25 years as part of 2450-hectare project.

“With housing affordability throughout Brisbane and South East Queensland out of reach for many Australians, The Rise is keeping the dream of home ownership alive,” Mr Leggatt said.

Professor Stimson warned that jobs growth needed to accompany residential growth if it pushed further west than Ipswich.

He said jobs growth remained concentrated in the Sunshine Coast to Brisbane to Gold Coast line.

“Over the years I have been quite a critic of the Southeast Queensland planning process, which has tried to force growth into that western corridor because all the economic data demonstrates all the jobs growth is along the linear corridor that stretch to the north and south of Brisbane.”

Unemployment figures show Ipswich’s unemployment rate marginally higher in May 2015 than Brisbane’s western suburbs.

Unemployment – May 2015

Brisbane’s southside – 5 per cent

Brisbane’s inner-city – 5.5 per cent

Brisbane northside – 5.6 per cent

Gold Coast – 6.1 per cent

Brisbane West – 6.3 per cent

Moreton Bay – 6.3 per cent

Sunshine Coast – 6.8 per cent

Ipswich – 7 per cent.

However Ipswich Mayor Paul Pisasale said Professor Stimson appeared to be unaware of new job developments in Ipswich.

Ipswich’s labour market statistics show unemployment beginning to fall from 9 per cent to 7.4 per cent, with 2600 jobs created since March.

“We have a massive amount of industrial, commercial and retail development including the largest concentration of transport and logistics companies in Australia with DB Schenker, Northline and TNT at Redbank,” he said.

Cr Pisasale said jobs were being created at the new HOLCIM project underway at Swanbank, the new GE Electrical building at Springfield Central and with the Orion Shopping Centre doubling in size.

“RAAF Base Amberley is also continuing to expand with a workforce of more than 5000,” he said.

“Ipswich and the western corridor has a major role to play in satisfying growth in Southeast Queensland.

“We can’t continue to simply concentrate growth within Brisbane and the coastal fringe if we think we will maintain the same quality of life.”

In May 2010 former premier Anna Bligh announced plans for three mega-cities in Southeast Queensland to provide homes for 250,000 people.

Those three cities – at Ripley (near Ipswich), Yarrabilba (south of Logan) and Bromelton – about six kilometres south of Beaudesert – are all underway

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Investment Advice

Low interest rates cuts negative gearing ATO investor claims in 2012-13

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Low interest rates cuts negative gearing ATO investor claims in 2012-13

Low interest rates cuts negative gearing ATO investor claims in 2012-13

 

Record low interest rates have shown up in new statistics from the Australian Taxation Office, in a sizable drop in negative gearing tax claims by property investors.

Claim for rental properties fell from around $13.8 billion to $12 billion between the 2011-12 and 2012-13 financial years.

The latest statistics for 2012-13 show that 1.26 million people deducted losses made on investments (including mortgage interest) from their overall income, from the 12.7 million lodged individual tax returns.

The overall cost of negatively-geared rental properties has fallen by $2.4 billion, or 31 per cent, in 2012-13, due to record low interest rates and higher rents.

The Tax Office’s latest statistics shows 1.9 million landlords.

The value of rent returned was up 8.6 per cent to $36 billion but the value of interest claimed was down 6.7 per cent to $22 billion.

While the number of landlords with negatively-geared properties increased by almost 60,000, their tax deductions fell 13 per cent.

​The highest number of property investors claiming tax deductions had a taxable income – after tax deductions – of between $37,000 to $80,000 a year.

By JONATHAN CHANCELLOR

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Nearly two milllion negative gearing investors across Australia: ATO

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Nearly two milllion negative gearing investors across Australia: ATO

Nearly two milllion negative gearing investors across Australia: ATO

Negative gearing property investors now total 1,967,260 across Australia, according to the ATO latest data.

That’s up from the 1,895,775 in the previous tax year, 2011-12.

There were 1,811,175 investors claiming rental income in the 2010-11 year.

The ATO has a investor rental video series on working out your tax correctly.

The statistics for the 2012–13 income year were sourced from 2013 individual income tax returns processed by 31 October 2014. The statistics are not necessarily complete.

This data is not representative of the total number of properties.

By JONATHAN CHANCELLOR

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