UBank's UHomeLoan has been offering one of the lowest interest rates that I have seen from a subsidiary of a Big Four Bank. At 6.59% with a possible 0.2% discount for loyalty, and then even the possibility of getting $500 back if you are already a UBank customer, it took me quite a while to understand why the whole nation was not refinancing with UBank.
Who's UBank?
First of all, one major reason from talking with friends is that people are afraid of signing up to UBank because they practically never heard of it. It's only when you mention to them that it is a part of the National Australia Bank that they feel a little more at ease.
All Online (Skype even)
The second thing is that everything is online. For someone who is pretty savvy with the internet, this is definitely not a negative point for me. On the contrary, I prefer dealing with the internet than some customer "service" officers in a bank.
So what if there's no offset?
The third point is the technical point that many newbies like myself may not know. It involves negative gearing which is a big issue since one in seven taxpayers in Australia are property investors, according to the ATO. The problem is, UHomeloan does not have an offset account. Apparently if you start with a home loan of $250,000 and you pay it down to $100,000 for example, and then you buy another house with the intention of using the current house as an investment property, it may not be good for tax purposes to have no offset account. This is how it was explained...
House 1 becomes your investment property so because you can claim tax deduction on your interest rate repayments, you want to be paying MOST of your interest on this property since it is tax deductable. However, when you take out, say, $80,000 from your existing loan to buy House 2, the ATO may not like this because in some ways, your interest repayment is inflated on House 1. You were down to paying interest on only $100,000 but when you claim your tax deduction, its now based on ($100,000+$80,000 =) $180,000. This is obviously not financial advice and I have kept this explanation quite general to reflect that but basically, when you have an offset account, you wouldn't have this problem. If you are not planning to leapfrog from one property to another in the future, then you wouldn't have a problem with UBank not having an offset account. So I finally worked out what you could say is the "catch" behind a very good deal.
Other posts on UBank
Monday, April 30, 2012
New Home Sales Lowest Since 1994
It was the year Forrest Gump, Dumb and Dumber and the the Lion King were showing at the movies, the Gulf War was brewing, Michael Jordan made his first comeback to the NBA and I was in my first year of high school. 1994 was the last time that new home starts in Australia have been this low. In March 2012, only 5443 new houses across the country were sold which was the lowest number since May 1994 almost 18 years ago. In WA, new home sales dropped 12% in March which was second to Queensland's 15.3% drop according to the Housing Industry Association.
Most analysts are predicting a 25 basis point cut tomorrow when the RBA meets.
Most analysts are predicting a 25 basis point cut tomorrow when the RBA meets.
Monday, April 23, 2012
Again Real Estate Lets WA Down
COMSEC released today findings that see the West Australian economy running rings around the rest of the country to the point that analysts needed to look at Australia's economy in two metrics - one including WA and one without WA's figures.
WA was on top in five of the eight economic inidicators - retail spending, economic growth, equipment investment, unemployment and construction work. Economic output was 32% more than the average in the last10 years in WA, construction was 82% above decade averages and retail spending 21% above average. In population growth, we were second. However, when it came to the two real estate indicators, dwelling commencements and housing finance, WA is in the middle of the pack with dwelling starts 15% below the decade average. There are signs that housing finance will improve in the coming months for WA as February recorded almost 20% improvement from a year ago.
WA was on top in five of the eight economic inidicators - retail spending, economic growth, equipment investment, unemployment and construction work. Economic output was 32% more than the average in the last10 years in WA, construction was 82% above decade averages and retail spending 21% above average. In population growth, we were second. However, when it came to the two real estate indicators, dwelling commencements and housing finance, WA is in the middle of the pack with dwelling starts 15% below the decade average. There are signs that housing finance will improve in the coming months for WA as February recorded almost 20% improvement from a year ago.
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